GO Item 2
September 12,2011
Worksession
MEMORANDUM
TO:
FROM:
Government Operations and Fiscal Policy Committee
(r
Glenn Orlin, Deputy Council Staff Director
SUBJECT:
~ichael
Faden, Senior Legislative Attorney
Worksession:
Bill 21-11, Taxes - Transportation Impact Tax - Credits
Bill 21-11, Taxes - Transportation Impact Tax - Credits, sponsored by Councilmembers
Floreen and Rice, was introduced on June 21, 2011. A public hearing was held on July 12 (see
testimony, ©9).
Background.
Bill 21-11 would implement recommendations 3-6 of the Clarksburg
Infrastructure Working Group, submitted to the Council on Apri113 (see report excerpts on ©5­
6). All recommendations apply to the credits allowable to developers under the transportation
impact tax, but most of the recommendations would apply only to the Clarksburg impact tax
district.
The Clarksburg Infrastructure Working Group, an II-member committee of Clarksburg
residents, developers, and County officials, was directed by Council Resolution 16-1544 "to
review and prioritize the necessary infrastructure items for the Clarksburg area and propose
suitable mechanisms to finance the recommended infrastructure items". After prioritizing the
unbuilt master planned projects, the Working Group tried to find suitable ways to generate new
revenue for Clarksburg's infrastructure but it came up empty.
The Working Group then turned its attention to the funding of infrastructure that was
already the responsibility of the Clarksburg Town Center and Clarksburg Village/Arora Hills
developers to build under their respective subdivision approvals. For the Town Center, the
Working Group recommended (see recommendation 7 on ©6) amending the impact tax law to
allow the developer of Clarksburg Town Center to claim impact tax credits that
it
would have
been entitled to if it had not expected the now-terminated Clarksburg Town Center development
district to reimburse the cost of certain roads the developer built. This recommendation would
allow a near-$2 million credit against future transportation impact taxes.
However, Bill 22-11 would not implement recommendation 7. After the Working Group
submitted its report, attorneys for the developer, NNP II Clarksburg, LLC, filed a notice of
claim with the County. This notice is required under state law before the developer can sue the
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County for damages claimed as a result of the County's termination of the development district.
Council staff advised, and lead sponsor Councilmember Floreen concurred, that it would be
imprudent for the County, through legislation or otherwise, to offer this reimbursement while the
potential lawsuit is unresolved.
In Clarksburg Village and Arora Hills, the developers included conditions in
homeowners' sales contracts and placed liens on property deeds that would allow the imposition
of a private infrastructure charge if a development district is not established there. The private
charge varies by housing type, ranging from $600-1,500 annually, in December 2003 dollars.
Local residents, including resident members of the Working Group, said they would challenge
the legality of this charge. During a Working Group meeting, these developers offered to reduce
the magnitude of their private charges to collect no more than $25 million, noting that their
public infrastructure costs far exceed this amount, but that they would begin to collect this charge
in 2012. The Working Group recommended additional ways to provide more impact tax credits
for these developments with the understanding that the private charges would be reduced by the
aggregate amount the developers would benefit from these additional credits. Each credit
provision is described and analyzed below:
Fiscal impact
The OMB fiscal impact statement on ©7-8 does not estimate the revenue
loss resulting from each of the impact tax credit changes proposed in this Bill.
Issues
1) Should the life
0/
a transportation impact tax credit be extended/rom
6
to 20 years?
From 1986 (when the first impact tax law was enacted) until early in the last decade, there was
no deadline by which an impact tax credit must be used. In 2003 County Department of
Transportation staff raised concerns about credits that were granted many years before; they
argued that credits, like subdivision approvals themselves, should expire if not used within a
reasonable time. The Council concurred and set a limit of 6 years for credits certified on or after
March 1,2004. Developer members of the Working Group argued that the 6-year rule unfairly
penalizes larger developments that have an extended buildout period, and they would build their
required road improvements sooner if they know their credits will not expire so quickly.
Ultimately the Working Group unanimously recommended a 20-year limit. However, as far as
Council staff knows, none of Clarksburg Village's or Arora Hills' impact tax credits have
expired to date. Each developer has synchronized the construction of his roads to the pace of
buildout so that no credits have expired.
This provision of Bill 21-11 (see ©2, lines 19-21) differs from others in that it would
apply countywide. The consequence for County impact tax revenue can only be negative, since
there certainly would be some situations where credits would expire in 6 years but not in 20.
However, it is impossible to determine how much revenue loss is involved: it could be relatively
small or quite large. In any event, the loss would be magnified if this extension is applied
countywide.
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Council staff recommends extending the deadline for credits from 6 years to 20
years only for developments located in the Clarksburg impact tax district.
The Working
Group's discussions were centered solely on Clarksburg issues, residents, and developers.
Before approving policy changes that will affect other parts of the county
including the
municipalities of Rockville and Gaithersburg - the Council should have a wider discussion and
analysis ofthis issue.
For this and the report's other impact tax credit recommendations, the broader
development and civic communities could question why any Clarksburg-specific measures are
warranted. Council stafr s response is that the Clarksburg situation already differs from the rest
of the County in a very significant way: Clarksburg's transportation impact tax rates are higher-­
50% higher for residential development and 20% higher for non-residential development,
compared to the other non-Metro Station Policy Areas in the County. This was part of the
Council's 2003 decision to eliminate the Policy Area Transportation Review test from the
Growth Policy. At that time the Council agreed with the Planning Board that eliminating PATR
would reduce the amount of road construction required of developers in Clarksburg, so the
Council compensated by setting higher impact tax rates there. However, in 2007 the Council
reinstated a Policy Area Review test (PAMR), so the policy rationale for higher tax rates in
Clarksburg no longer applies. Council staff explained this history to the Working Group, but the
developers members preferred to have broader impact tax credits rather than reduce the tax rates.
2) Should impact tax, credits be allowed in Clarksburg for arterial improvements that
do not add capacity but bring roads to current standards?
A basic tenet of impact taxes is that
new development should pay all, or a large share of, the cost of infrastructure that is needed
because of higher demand generated by that development That is why transportation (and
school) impact tax revenue is only used for improvements that add capacity. A corollary of this
tenet, therefore, is that credits against impact taxes should be granted only for developer-funded
improvements that add capacity.
Currently, the law defines the type of projects that are eligible for impact tax credits as
those County roadway or intersection improvements that add capacity. This excludes projects
that improve an existing road by bringing it up to current standards. In Clarksburg, for example,
some roads - such as Skylark Road and Snowden Farm Parkway (between Clarksburg and
Stringtown Roads) - were upgraded from a rural byway to suburban standards without adding
travel lanes.
An 8-3 majority of the Working Group felt that these roads have been made safer and,
although through lanes were not added, their capacities have also increased by straightening
them and widening lanes. The Bill extends credits to these non-capacity improvements, only for
developments located in the Clarksburg impact tax district, on ©2, lines 7-10. The Working
Group minority pointed out that these types of improvements have always been required of
developers of new subdivisions and have never been creditable against the impact tax. The
minority were also concerned about providing a different credit standard for Clarksburg.
Any new credit granted means that the Clarksburg Impact Tax District will collect so
much less revenue in the future that can be used towards future road improvements, such as the
3
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extension of Observation Drive, which is essential for construction of the Corridor Cities
Transitway (which will run in the median) and other development between 1-270 and MD 355 in
Clarksburg. Two specific road improvements cited by the Working Group would be eligible for
credit under this provision: Skylark Road between MD 27 and Piedmont Road, and Snowden
Farm Parkway between Stringtown and Clarksburg Roads. Each was an existing two-lane road
upgraded to suburban standards; their additional credit values (developers' estimates) are $4
million for Skylark Road to Clarksburg Village/Arora Hills and $2.4 million for Snowden Farm
Parkway to Clarksburg Town Center. There would likely be other credits in the future for
improvements by other developments yet to occur.
Council staff recommends this provision as long as it is restricted to the Clarksburg
impact tax district.
3) Should impact tax credits be allowed/or State road improvements?
Since 1988 the
County has not allowed transportation impact taxes to be used to build State road improvements
that add capacity. Historically this policy was adopted for two reasons:
(1)
the State should be
responsible for funding improvements to its system; and (2) since the County's impact tax is set
to cover most of the costs of capacity-adding County transportation projects, adding the State
system to the mix would require raising the impact tax rates by several orders of magnitude.
Nevertheless, credits were granted to developers who provided capacity-adding improvements to
State roads until the Council changed the law effective in March 2004.
Within Clarksburg, therefore, the current impact tax law does not allow credits for
capacity-adding improvements to State roads such as MD 27, MD 121, and MD 355.
An
8-2
majority of the Working Group (with one abstention) recommended allowing State road
improvements located in or adjacent to Clarksburg (see ©2, lines 15-17) to be credited, since
they add capacity just as County road improvements do and all such capacity benefits County
travelers.
This would arguably result in more State road improvements being built.
(Councilmember Floreen has expressed her intent to consider expanding the availability of
impact tax credits for capacity improvements to State roads outside the Clarksburg impact tax
district.) A concern of opponents was that this would further deplete impact tax revenue for new
transportation facilities. Specific road improvements eligible for credit under this provision are
the widening of MD 27 from Observation Drive to Snowden Farm Parkway and the MD
355/Brink Road intersection, which together are valued by the developers at about $12 million.
Council staff disagrees with the Group's majority opinion that allowing State road credits
would result in more State road improvements being built. Developers do not built off-site
improvements, on State or County roads, because they are
incentivized
to do so, but only because
they are
required
to do so as a condition of their subdivision approvals. Nevertheless, if the
Council decides to grant this relief for the Clarksburg Village/Arora Hills developers (and some
other future developments),
it
would come at the cost of reducing the same amount of revenue
for future County capacity-adding improvements and thus slowing down their implementation.
Council staff recommends this provision as long as it is limited to the Clarksburg
impact tax district.
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4) Should impact tax credits be transferable, either inside Clarksburg or County-wide?
A small majority of the Working Group (see ©5) recommended that developers in Clarksburg be
allowed to sell excess credits (credits that exceed the amount of transportation impact tax due on
the building permits in that development) to developers in Clarksburg and any other impact tax
district in the County.
A 10-1
majority of the Working Group recommended that the transfer of
excess credits be limited to other developments in the Clarksburg impact tax district. The Bill
reflects the Group's broader (but less supported) recommendation (see
©2-3,
lines
24-32).
Here again, there has been no discussion of a broader transferability of impact tax credits,
which the law had permitted for several years until the Council repealed that authority in 2003.
Councilmember Rice would amend
©2,
line
27,
to replace any with the Clarksby.rg, so that
impact tax credits could be transferred only to other properties in the Clarksburg impact tax
district, rather than County-wide.
Council staff recommends Councilmember Rice's amendment to limit this provision
to the Clarksburg impact tax district.
(Testimony from developer representatives (see Orrick and Flanagan testimony on ©11­
14) noted that they may propose "minor changes" to this Bill, but did not specify what those
amendments would be.)
This packet contains:
Bill 21-11
Legislative Request Report
Clarksburg Working Group report (excerpts)
Fiscal impact statement
Public hearing testimony
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Bill No.
21-11
Concerning:
Taxes - Transportation
Impact Tax - Credits
Revised: 6-15-11
Draft No. 1A
Introduced:
June21,2011
Expires:
December 21,2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _-:-_ _ _ _ _ _ __
Sunset Date: -!..!No::::.!n.!.!:e:--_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council members Floreen and Rice
AN
ACT to:
(1) modify the credits which apply to the transportation impact tax;
(2) allow certain excess credits to be transferred; and
(3) generally amend County law regarding transportation impact taxes.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-55
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No. 21-11
1
Sec. 1. Section 52-55 is amended as follows:
52-55.
Credits.
2
3
4
5
6
7
*
(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
improvement
reduces
traffic
demand
or
provides
additional
transportation capacity except (for
f!
development that is located in the
Clarksburg impact tax district) an improvement to
f!
County arterial road
that does not add traffic capacity but brings the road to current road
design standards. 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 Gaithersbur& or (for
f!
development that is located in the
Clarksburg impact tax district) an improvement to
~
8
9
10
11
12
13
14
15
16
17
State road that is
located in or adjacent to the Clarksburg impact tax district.
18
19
*
*
(4)
*
Any credit that was certified under this subsection on or after
March 1,2004, expires [6] 20 years after the Department certifies
the credit.
20
21
22
23
24
25
26
27
*
*
Section exceeds the applicable tax.
*
However, the owner of
~
(e) A refund must not be granted when any credit certified under this
development that is located in the Clarksburg impact tax district may
transfer any unusable credit against the development impact tax to
another property owner in any impact tax district.
The transferee is
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BILL
No. 21-11
28
29
30
31
32
33
34
Approved:
entitled to the amount of credit transferred to
ih
!!J2
to the amount of
unpaid impact tax the transferee owes. The transfer of any credit is not
effective until the transferor notifies the Department of Permitting
Services of the transfer. The transfer of any credit under this subsection
does not extend the expiration date ofthat credit under subsection
(Q1
*
*
*
35
Valerie Ervin, President, County Council
Date
36
Approved:
37
Isiah Leggett, County Executive
Date
38
This is a correct copy o/Council action.
39
Linda M. Lauer, Clerk ofthe Council
Date
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LEGISLATIVE REQUEST REPORT
Bill 21-11
Impact Tax
-
Amendments
DESCRIPTION:
Extends the time period that a developer can use transportation
impact tax credits from 6 years to 20 years. For Clarksburg
developments only, grants impact tax credits for capacity
improvements to State roads. Establishes a credit/exchange system
for impact tax credits. . For Clarksburg only, allows credits for other
types of roads that are not currently eligible for impact tax credits.
Sufficient financing is not available to build needed transportation
improvements in the Clarksburg area.
To allow enhanced use of transportation impact tax credits, among
other solutions, to stimulate funding of needed transportation
improvements in the Clarksburg area and elsewhere.
Departments of Finance, Transportation, Permitting Services
To be requested.
To be requested.
To be requested.
To be researched.
Michael Faden, Senior Legislative Attorney, 240-777-7905
Applies only to County transportation impact tax.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMA TION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENAL TIES:
Not applicable.
f:\law\bills\ 1121 impact tax - credits\legislative request report.doc
®
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:'
,
'
2. Do not establish a special taxing district for the Clarksburg Town Center (2-9-0).
Those opposing a special tax district for AHlCV oppose a special tax for CTC for the same
reasons. Many of those supporting the special tax for AHfCV did so only because of the
prospect of the higher private infrastructure charge; but there is no such prospect for CTC, so
they do not support a special tax here. A small minority believe that a special
tax
for CTC is
equitable considering the expectations raised over the years by the then-pending development
district, and since the revenue from a special taxing district is the only way that the rest of
CTC-and especially its retail
core~an
be re-started.
3. Extend the time period that a developer can use impact tax creditsfrom
6
years to 20
years (l1-O-0).
Currently the law requires that any credit be applied within 6 years after DOT
has certified it. The Group unanimously believes that the 6-year use-it-or-lose-it provision
should be extended to
20
years, which is the expiration period for WSSC's System Development
Charge credits. The current rule unfairly penalizes larger developments that have an extended
buildout period.
The developers will feel more assured to build their required road
improvements sooner if they know their credits will not expire so quickly.
4. For Clarksburg developments only, grant impact tax credits for capacity
improvements to State roads
(8-2-1).
The impact tax law allows credits for capacity-adding
improvements to County roads, but not to State roads such as
MD 27,
MD
121,
and
MD 355.
The majority of the Group would allow State road improvements to be credited, since they add
capacity just as County road improvements do, and all such capacity benefits county travelers.
This would also result in more State road improvements being built. A concern of those opposed
is that this would further deplete impact tax revenue for building new transportation facilities.
5. Establish a credit/exchange system for impact tax credits.
The impact tax law does
not allow credits earned from transportation projects built by a development to be used against
anything but the impact tax payments to be made by the development itself. Allowing
Clarksburg developments to sell any excess credits to other Clarksburg' developments would
recoup some of its costs; allowing them to sell excess to other developments elsewhere in the
County would broaden the opportunity for cost savings.
A
small majority (6-4-1) would allow Clarksburg developers to sell their excess credits to
any willing buyer in the County.
It
is a matter of fairness: if a developer is spending more on
roads than his impact taxes would be, then he should be able to recoup some of the difference by
selling the excess credits. The larger the universe of potential buyers, the more likely the
developers will be able to benefit from their excess credits, which would reduce the special
district tax (see Recommendation #1).
The minority point out that impact tax revenue would be depleted countywide, meaning
less funds for future improvements.
A
more restrictive version of this concept-limiting the sale
of excess credits to other developments
in
Clarksburg--enjoys much broader support
(to-l-0).
While there would be fewer "buyers" of excess credits, the lost impact
tax
revenue would be
limited to Clarksburg, and so only Clarksburg'S future transportation revenue would be affected.
16
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6. For Clarksburg only, designate other types of roads for impact tax credits that are
not eligible currently (8-3-0).
Currently, the law defmes the type of projects that are eligible for
impact
tax
credits as those County roadway or intersection improvements that add capacity. This
excludes projects that improve an existing road by bringing it up to current standards. In
Clarksburg, for example, some roads-such as Skylark Road and Snowden Farm Parkway
(between Clarksburg and Stringtown Roads)-were upgraded from a rural byway to suburban
standards, even without adding travel lanes.
A majority of the Group feels that these roads have been made safer and, although
through lanes were not added, their capacities have also increased by straightening them and
providing wider lanes. The minority point out that these types of improvements have always
been required of developers of new subdivisions, and they have never been creditable against the
impact tax. They are also concerned about providing a different credit standard for Clarksburg.
7. Grant CTC a credit equal to the nearly
$2
million in transportation impact taxes it
has paid (11-0-0).
CTC's point is that if it knew there would be no development district,
it
would have applied for credit for the capacity-adding roads it built. The Group unanimously
agrees that this would be a just resolution of the matter.
I"~
i :
8. Forgive the
$1.6
million that would have been paid by the CTC Development District
for its share of the construction of Stringtown Road from /-270 to MD
355 (8-1-2). The
General Fund advanced the $1.6 million to allow the project to be completed several years ago.
Most of the Group agrees that without a development district, this obligation should be forgiven.
D. Future Steps
Should the Council concur with the Group's proposals, it would enact a bill amending the
Development Impact Tax law
to
incorporate the recommended provisions. Furthermore, once
there is a determination as to the monetary benefit of these provisions to Arora Hills and
Clarksburg Village, a special taxing district should be established that would, over time, collect
the balance of $25 million for these two developments.
As for Clarksburg Town Center, the nearly $2 million of credits the Group believes it is
owed will also require a special provision in the Development Impact Tax Law. The $1.6
million obligation toward the cost of Stringtown Road Extended can be forgiven administratively
by the Department of Finance, ifthe County Executive approves .
•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
The Working Group acknowledges the support of County staff, including: Glenn Orlin,
Michael Faden, and Susan Mabie, Council staff; Sue Richards, Office of Legislative Oversight;
John Carter, Ron Cashion, Steve Carey, and Christopher McGovern, M-NCPPC; Michael
Coveyou, Department of Finance; and Bob Simpson, Department of Transportation.
The Group particularly expresses its gratitude to Nate Betnun and Kojo Asiedu of Stone
&
Youngberg, who performed the analysis of several special taxing district options
pro bono.
18
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-.
'l-lA~
c..c...
063981
OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
S~~
1.....'­
t\~
Gb
Joseph
F.
Beach
Director
MEMORANDUM
July 12,2011
TO:
FROM:
.Valerie Ervin, President, County Council
,
:'
~
Joseph F. Beach,
Dire~
:
,}
SUBJECT: Bill 21-11, Jmpact Tax - Amendments
The purpose ofthis memorandum is to transmit a fiscal and economic impact
statement to the Council on the subject legislation.
LEGISLATION SUMMARY
By amending Chapter 52, Section 52-55 of the MontgomeryCounty Code, the
proposed legislation implements four recommendations of the Clarksburg Infrastructure
Working Group, submitted to the Council on April 13, 2011:
• Extends the time period that a developer can use transportation impact
tax
credits from 6 to 20
years, to
align
with the expiration period for WSSC's System Development Charge credits, and
avoid unfairly penalizing larger developments that have an extended build out period;
REG #3
• For Clarksburg developments only (perhaps outside the Clarksburg impact tax district
depending upon final Council action), grants impact tax credits for capacity improvements
to
State roads such as MD 27, MD 121, and MD 355 as improvements to State roads can also
add transportation capacity and benefit county travelers;
REC
#4
• Establishes a credit/exchange system for impact
tax
credits to allow Clarksburg developments
to sell any excess credits to other Clarksburg area developments (perhaps outside the
Clarksburg impact
tax
district depending upon
final
Council action), to broaden the
opportunity for cost savings to developers;
REG #5
• For the Clarksburg Development District, allow impact
tax
credits for other types ofCounty
arterial road safety (as opposed to capacity) enhancements that are not currently eligible; by
bringing them up to current standards (e.g., upgrading from a rural byway to suburban standards
with improvements such as curb/gutter, shoulders, wider lanes, improved site lines);
REG #6.
101
Monroe
Street, 14th Floor·
Rockville,
Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Valerle Ervin, President, County Council
July
12, 2011
Page 2
FISCAL AND ECONOMIC
SUMMARY
Enacting this legislation (in combination with Bill 22-11 establishing a
Clarksburg special taxing district)
is
expected to have a localized fiscal impact that would over
time generate approximately $25 million
to
help defray transportation infrastructure construction
and improvement costs in the Arora Hills and Clarksburg Village geographic areas ..
The legislation has no quantifiable impact on employment, personal income,
investmen~
or other economic variables to the Montgomery County economy as a whole.
The following contributed to and concurred with this analysis: Michael Coveyou,
Department of Finance, Bryan Hunt, Office ofManagement and Budget.
JFB:bh
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices ofthe County Executive
Karen Hawkins, Acting Director, Department of Finance
Michael Coveyoll, Department of Finance
Bryan
Hun~
Office ofManagement and Budget
Amy Wilson, Office of Management and Budget
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))
Good Afternoon:
I am Jennifer Russel, Principal at Rodgers Consulting, and I am here today in my
capacity as Chair of the Clarksburg Infrastructure Working Group. I have a history with
Clarksburg, given that I was the first Clarksburg Ombudsman, so I would like to witness
a solution for Clarksburg that will move it towards completion.
I am pleased to see that the recommendations of the Working Group have so
quickly become pending legislation. I thank you and the Council's staff, who were so
instrumental in the thought processes associated with our work earlier this year, for
bringing our suggestions to reality. The legislative package that the Working Group
came up with is fairly reflected in the series of bills pending before you today. I am well
aware of the fact that there were varying viewpoints amongst the members of the
Working Group; however everyone wants special consideration for Clarksburg so that
we can all realize the Master Plan vision favored in the 1994 Plan, an effort that requires
the construction of much needed infrastructure. All of our efforts underscored this acute
need to get roads and allied infrastructure built as soon as possible, along with
identifying the means to do so.
Bill 21-11 would implement fully three recommendations made by the Working
Group. The underlying initiative behind these recommendations was to make impact tax
credits more valuable in the marketplace in order to incentivize the development
community to utilize them. It was our unanimous belief that moving in this direction
would get more roads built, our number one goal. The extension of the time period that
developers can use impact tax credits from 6 to 20 years will encourage developers to
build required roads sooner, knowing that the credits won't expire, will work more
efficiently with larger developments and will actually be a return to the practice in the
County prior to 2003 when credits were good until they were used.
The legislation's intent to grant tax credits for capacity improvements to State
roads is viewed as an advantageous move that will result in more State road
improvements being completed. While the legislation currently suggests limiting this
incentive to State roads that are located in or adjacent to the Clarksburg impact tax
district, I believe that part of the GO Committee's evaluation of the proposed legislation
should consider expanding this incentive to the entire County. If these private funds are
used more zealously to build State roads, this would simply give us an opportunity to
move more State-funded projects in Montgomery County up on our priority list. The
companion concept to expand the definition of road improvements beyond "capacity­
increasing" within Clarksburg only, in order to accrue additional tax impact credits
should indeed be included in the legislation, for the simple reason that developers will
be more inclined to make these improvements, many of which are safety-oriented.
(j)
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The establishment of a credit/exchange system for impact tax credits is the final
Iynchpin in the package presented by the Working Group. The ability to sell excess
credits to any willing buyer in the County was supported by a small majority of the
group. It does appear that if there is a larger pool of potential buyers, this concept might
be more feasible.
The establishment of a Special Tax District per Bill 22-11 was endorsed by a
small majority of the working group as an alternative to the private infrastructure charge.
Some concerns were voiced at a recent Clarksburg meeting as to the amount of the
yearly charge, projects to be funded and other details. It is important to note that this
bill merely establishes the framework for a future district with subsequent public
hearings required to establish a rate and an approved listing of infrastructure.
The proposed district described in Bill 22-11 is viewed as an integral part of the
mechanism needed to make Clarksburg whole, with respect to infrastructure. With
companion Bill 21-11 increasing the financial value of the impact tax credits through the
various means previously endorsed, this carefully crafted package could have a
profoundly beneficial effect on Clarksburg's future. Thank you for the opportunity to
comment.
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./
fJ
LlNOWESI
AND
BLOCHER
LLP
MEMORANDUM
TO:
County Council Members
John
R.
Orrick, Jr.
July 12,2011
Testimony on Bill Numbers 21-11 (Taxes - Transportation Impact Tax­
Credits) and 22-11 (Clarksburg Area Special Taxing District)
FROM:
DATE:
RE:
My name is John
R.
Orrick, Jr. of Linowes and Blocher LLP and I am appearing on
behalf of Beazer Homes and Elm Street Development Company in support of Bills 21-11 and
22-11, with amendments, as I will describe herein.
A brief word of background on these Bills. The developers on whose behalf I am
testifying are the original property owners or their successors in interest to two subdivisions in
Clarksburg, Maryland: Arora Hills and Clarksburg Village. Each of these subdivisions received
its Site Plan approvals with the MNCPPC based on an express understanding that a development
district would be formed under Chapter 14 of the Montgomery County Code to pay for a
substantial portion of the public infrastructure improvements required as a condition to such Site
Plan approvals. As you are aware, due in part to the controversies raised over the use of Chapter
14 development districts by citizens in Clarksburg, neither of these development districts has
ever been implemented. A working group was formed this past fall which was comprised of
representatives of citizens living within the impacted developments, the developers, County Staff
and outside experts (the "Clarksburg Infrastructure Working Group") to evaluate the best course
of action for proceeding with a plan to fund the public infrastructure which has largely, but not
entirely been completed, by the developers of Arora Hills and Clarksburg Village. The two Bills
in question arose out of recommendations which were adopted by such Clarksburg Infrastructure
Working Group in April 2011.
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LlNOWESI
AND
BLOCHER
LLP
During the discussions of the Clarksburg Infrastructure Working Group, representatives
of the two developers consistently indicated that, if a solution to funding a significant portion of
the infrastructure costs they had incurred were arrived at, they would not insist on the imposition
of a private infrastructure charge which they had recorded against their properties prior to the
sale of the lots to homebuyers. Various options were discussed by the Infrastructure Working
Group to finance this infrastructure, and Bill Nos. 21-11 and 22-11 represent an amalgam of
several of these recommendations.
At this time, the developers believe that with some modifications, Bill 21-11, which
provides amendments to the County's Transportation Impact Program, may generate sufficient
revenues so as to significantly repay the portion of infrastructure that they had originally looked
to the Chapter 14 Development District andlor the private infrastructure charge to recoup. While
the developers have not had detailed discussions with representatives of the County Government,
and would need to do so prior to making a firm determination as to the reliance on impact tax
credits as a means of recoupment of their infrastructure charges, the developers believe that with
certain modifications, there may be potential to avoid the need for either a special taxing district
as contemplated by Bill 22-11 or a private infrastructure charge to be imposed.
We urge the Council to adopt Bill No. 21-11 with amendments, and also ask that the
Council do so prior to taking action on Bill 22-11, the Clarksburg Area Special Taxing District.
The specifics of the amendments will be addressed in the work sessions on this BilL Should the
impact tax credits allowable by Bill No. 21-11 not be sufficient to allow the developers to recoup
the infrastructure investment they have made in substantial part, they would support Bill 22-11
with the additional caveat that the County adopt a resolution which states the actual list of
infrastructure that would be subject to reimbursement through the taxing district.
**L&8
1577664v2/00045,0602
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DEVELOPMENT
July 12,2011
Montgomery Council
Office of Legislative Information Services
100 Maryland Avenue
Rockville, MD 20850
Re:
Bills 22-11, 21-11
&
23-11
Dear President Ervin and Council Members,
This letter is to serve as my written testimony in the public hearings for bills 21­
11,22-11 and 23-11.
I have been working on our Clarksburg Village development for the past 27 years.
As a member of the Citizens Advisory Committee for the 1994 Master Plan, I am very
aware that future development districts were always planned to be a major component of
the creation of Clarksburg. It was clear in the early 1990's that the County would not split
the cost of the transportation infrastructure with developers as was done in Germantown.
We were following this Master Plan blueprint when we requested the County Council to
authorize a development district for Clarksburg Village prior to our selling a single home.
At that time, we also recorded documentation notifying future homeowners that
Clarksburg Village would be subject to a future development district, either a public
district or a private district. The transportation infrastructure we agreed during the
preliminary plan process to build was based on the fact that a development district would
help us fund the improvements.
I have served on the Clarksburg Development District Task Force this Spring.
During those negotiations, we committed that if the impact fee law could be modified, we
would lower the amount of funds to be repaid to us through a development district. We
ask, therefore, that you address Bill 21-11 first before you address Bill 22-11. Except for
minor changes we will discuss during the planned work sessions, we strongly support the
adoption of both bills.
Bill 23-11 is acceptable to us in concept but needs to be re-worded. We certainly
do not request duplication of any county funding for our improvements. We do think,
however, that if impact taxes reimburse only a portion of the costs of any infrastructure
;:]
Annapolis
175 Admiral Cochrane Drive, Suite 112
Annapolis, Maryland 21401
Phone: (410) 266-9700
Fax: (410) 266-9165
;:]
It!,,in
Office
o
Ellicott
City
5074
Hall Drive, Suite 205
Ellicott City, Maryland 21042@.3
Phone: (410) 720-3021
Fax: (410) 720-3035
1355
Road, Suite 240
McLean,
Virginia 22101
Phone: (703) 734-9730
Fax: (703) 734-0322
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improvement, the remammg costs should be eligible for reimbursement through a
development district. As drafted, Bill 23-11 does not seem to allow for partial payments
from different sources to pay for the total cost of an infrastructure improvement.
We look forward to working with you during the work sessions to achieve an
outcome that is as fair as possible to all parties.
Sincerely,
David D. Flanagan
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7/12/2011
My name is Barry Fantle. I am a Clarksburg Town Center Resident, President of the Clarksburg Civic
Association and was a member of the Clarksburg Infrastructure Working Group.
I would like to offer my support of Bill 21-11. If approved this bill should allow the developer to apply
enough impact tax credits to effectively nullify any additional amounts they are asking for via their
private infrastructure agreement or the proposed special taxing district. About 13 million in impact
credits have been claimed by Arora Hill and Clarksburg Village. They have roughly another 65 million
available for transportation projects and about 72 million available for school projects.
I will quickly go over the items in 21-11 and give my rationale for voting for them while on the
infrastructure group.
3) I agree 100% with extending the time period for which credits can be used. This seemed like a no
brainer especially for larger developments. The developers also stated that it would let them build
infrastructure more quickly if they knew the credits would not expire.
4) I believe if a developer makes an improvement to an arterial road that effectively changes
the classification, then they should be allowed to claim an impact tax credit. For instance,
both Snowden Farm Pkwy and Skylard Rd were improved. While capacity may not have
been added, the roads were made safer and can safely handle a greater capacity. Allowing
the developers of Arora Hills and Clarksburg Village to get credit for this type of
improvement means that no argument can be made to include it in a Special Taxing District.
5) Credits for State roads. - State roads serve more than just the travelers of a particular community, so
to me this is good policy that will also have the benefit of encouraging more roads to get built. This will
also reduce the amount that the Arora Hills and Clarksburg Village developers could ask for in the
Special Tax District. For instance, before this bill, the developer would not be able to claim 4.5 million in
credits for the widening of 27 since it is a state road. Under this bill the developer will now be able to.
This means that no argument can be made to put this amount into a special taxing district. I agree with
Councilmember Floreen that this suggestion should be expanded beyond Clarksburg. This also has the
effect of encouraging more developers to do state projects and as a result the county will be able to
prioritize other roads that do not have the benefit of being built by a developer.
6) Establish a credit/exchange system for impact tax credits. - I did support this, but I do not know how
you can put a dollar amount on the credits or regulate the exchange. I do agree with Councilmember
Rice that impact taxes paid in Clarksburg should stay in Clarksburg. Especially with all the infrastructure
that is needed.
I believe that the suggestions by the working group will greatly reduce if not totally wipe out
the amount of money that could be placed in a Special Taxing District.
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I think it is premature to even consider setting up a Special Taxing District given it is
unknown what projects would or could be placed. Of 26 million in items that the Executive
recommended for original development district, I estimate that 23 million would be covered
by credits. The remaining mayor may not be eligible depending if they are considered
transportation. Ofthe 72 million that the developer originally petitioned, but was not
recommended, about 90% of that would have been covered by impact tax credits. The other
items being trails and such.
I have provided the Council with my dollar estimates regarding impact taxes collected and to
be collected. However, the council should obviously do their own analysis.
I believe the council should support items 3-6 from the Working Group, with the proposed
changes by Council member Floreen and Rice.
I do not believe the council should approve bill 22-11. Impact tax credits should cover any
amounts the developers
think
they are entitled to. And as Jennifer Barett said in one of our
last infrastructure working group meetings, "this money was never promised".
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Impact Tax Calculation for Elm Street/Artery based on unbuilt units and retail.
Potential
Unit Type
Single Family Detached
Single Family Attached
Garden Style
Retail
Total
School
Impact
Potential
School Impact
Units
1907
1360
816
129000
Transportation Impact Transportation
Impact
Tax
Tax
Rate
$17,116
$14,005
$10,891
$11
Tax
Rate
$32,640,212 $21,920
$19.046.soo $16,503
$8,887,056 $10,431
$1,444.800
62,018,868
Tax
$41,801,440
$22,444,080
$8,511,696
$0
72,757,216
Transportation
Impact
Tax
Credit previously used
Total
13,000,000
75,018,868
72,757,216
Notes:
1) The actual number wourd
be
slightly lower depending on MPDUs
2) Thirteen million in credits have already been used for built units. There may be more outstanding.
3) The transportaion impact
tax
rate for retail is $l1/SF
4) There will also be a senior housing building. This was not included in the calculations
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Elm Street/Artery County Executive Recommended Infrastructure List
County
Executive
Improvement
Recommended
Transportation
Credit
Petitioned
Difference
Stringtown(along d
vm
Frontage)
$1,600,000
$6,300,000
$11,300
6
000
$4,500,000
$1,600,000
$6,300,000
$11,300,000
$4,500,000
$0
$0
$0
$0
$1,500,000
$200,000
$600,000
$200,000
A-305 from Foreman Blvd to A-302
A-305 from A-302 to
MD27
M 027
Widening
darksburg Village South Park
$1,500.000
$200,000
Trail Crossing Foreman
Trail Crossing atA-305
Trail Gap
$600,000
$200,000
$26.200,000
$23.700,000
$2.soo,000
Notes:
1)
All items were part or Planning Board requirements
2)
Library has been
removed from the list.
3) The bottom four items might be eligible for credits thus reducing the difference.
4) The Transportation Credit column assumes eligibility based on CIWG recommendations.
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Elm Street/Artery Infrastucture List - Petitioned
Improvement
Stringtown(along Ci Viii Frontage)
A-305 from Foreman Blvd to A-302
A-305 from A-302 to MD27
MD27 Widening
Clarksburg Village South Park
Trail Crossing Foreman
Trail Crossing at A-305
Trail Gap
Skylark
Middle School Site Grading
Skylark Local Park
Greenway Trail(Skylark)
Lilttle Seneca Parkway (A-302)
A-305 from Stringtown to Foreman
MD355/MD27 Intersection
MD27/Brink Rd Intersection
Foreman Blvd
Elementary School Grading(CI Village)
Ele School/North Park Grading
CI Village South Local Park Grading
Greenway Trail(CI Village segment)
Total
Petitioned Amt
$1,600,000
$6,300,000
$11,300,000
$7,210,000
$1,500,000
$200,000
$600,000
$200,000
$4,980,000
$1,130,000
$1,750,000
$920,000
$19,560,000
$6,500,000
$1,150,000
$300,000
$3,850,000
$690,000
$750,000
$630,000
$1,820,000
$72,940,000
Transportation
Credit
$1,600,000
$6,300,000
$11,300,000
$7,210,000
School Credit
Petitioned
Difference
$0
$0
$0
$0
$1,500,000
$200,000
$600,000
$200,000
$1,130,000
$0
$0
$1,750,000
$920,000
$0
$0
$0
$0
$0
$0
$0
$0
$1,820,000
$6,990,000
$19,560,000
$6,500,000
$1,150,000
$300,000
$3,850,000
$690,000
$750,000
$630,000
$62,750,000
$3,200,000
Notes:
1) All items were part of Planning Board requirements
2) Library has been removed from the list.
3) Some park and trail items may be elilgible for credits thus reducing the difference.
4) The Transportation Credit column assumes eligibility based on CIWG recommendations.
5)A305 - Snowden Farm
6)A302 - Little Seneca Pkwy
7)A304 - Foreman
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Testimony before the Montgomery County Council
to Question the
Clarksburg Special Taxing District and Developer Tax Credit proposed legislation
22-11 and 21-11
July 12,2011
by
Lisa Winstel, resident
of
Clarksburg, MD
Good afternoon. My name is Lisa Winstel and I am a current resident of the Arora Hills subdivision of Clarksburg,
lvID.
Yesterday evening,
I
had the "opportunity" to drive home via Great Seneca Highway (Interstate 270 was experiencing a considerable
amount of traffic due to the burst gas main, necessitating my alternative route). As I drove home, at an extremely "leisurely" pace,
I
had ample time to consider my testimony before you this afternoon and, indeed, to rewrite my opening comments.
I found myself wondering, as I crawled along, if the lovely communities
I
passed had paid a special tax to reimburse the developers of
their
communities for the lovely boulevard I was traveling. I asked myself· Do the residents of Kentlands pay an additional
ad
valorem
property tax such as the one you are considering today? How about the residents ofLakelands?
I
passed community after
community.
I
passed retail establishments! Developed intersections! Perhaps the residents of Germantown paid for all the lovely
transportation improvements
I
had the time to admire!
My thoughts then turned to Interstate 270 (there was a lot of traffic and
I
had plenty of time for these thoughts).
I
reflected on my
youth. When
I
was growing up in Montgomery County, 1270 (then called 70S) was as narrow as Great Seneca Highway. But
someone, somewhere, had the foresight to project a need for a wider 270 that could handle projected capacity. Many of us at the time
made fun of the newly widened 270. We used to joke about watching out for approaching jumbo jets when driving. But no one paid an
extra, special property
tax
to make the necessary infrastructure happen. Someone, somewhere, some courageous planner or politician
knew had the foresight to understand - that infrastructure is necessary to create a thriving community.
My rush hour musings are now concluded.
Ladies and Gentlemen
I
am here today to speak in favor of a thriving community a thriving Clarksburg. In fact, if we must pay an
additional, special
ad valorem
property tax to create the community we all bought into, then so be it. But I stand opposed to the
legislation in front of you today.
I have yet to discover what specific projects are to be funded by 22·11. And, without a list of projects, there is no cap to the cost,
hence no limit to the amount ofthe tax or the duration of the provision.
Line 106 on circle 6 item 68 D
4
goes on to state that the Council
"may approve a resolution that lists each transportation infrastructure improvement that would be entirely or partly paid
for
by a
tax imposed under Section 68D-3."
Regarding expiration, line 232 on circle 10 item 68D7 states that
Any special taxing district created under this Chapter expires by operation of law 30 days after the cost of all
transportation infrastructure improvements identified in a Council resolution approved under Section 680-4, including all
outstanding bonds and cash advances made by the County, have been paid."
1/
In other words, as long as the Council continues to approve resolutions for infrastructure, the taxing can continue.
This proposed legislation authorizes the Council to continually approve projects and assess additional taxes.
I have yet to sign a blank check and I will not condone the Council doing so with my special tax dollars
in
Clarksburg.
On circle 12, we find an excerpt from the Clarksburg Infrastructure Working Group report. In this excerpt there is mention of a $25
. The report invokes the notion of offsetting the $25 million
with tax credits; potentially further reducing
million benefit
the special taxing district.
the amount to be raised
Now, please bear with me as I do a bit of "back of the envelope" math.
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At a March 23, 2011 meeting of the Clarksburg Infrastructure Working Group, David Flanagan, president of Elm Street Development
of McLean, Va., offered to reduce the total estimate of the amount to be spent by developers on road infrastructure to $25 million and
divide it into two pools, with current residents responsible for $12.5 million and future residents responsible for $12.5 million.
In the Planning Board draft of the Limited Amendmentto the Clarksburg Master Plan and Hyattstown Special Study Area, it is stated
that there are currently "approximately 5,200 dwelling units built in the Plan area, with a total of approximately 9,900 dwelling units
approved."
5,200 units sharing $12.5 million
=
$2,404 per household total
or
9,900 units sharing $12.5 million
=
$1,262 per household total
What is the $25 million figure referenced in the report? How does this translate into an estimated 30 year in duration
annual
tax of a
few hundred dollars per household? Surely this cannot all be due to interest and debt service costs! I thought that one of the reasons
for the County to provide the funding mechanism was to reduce these expenses.
All I ask for is a list of the proposed proj ects and an estimate of the costs. Provided with that factual information, residents of
Clarksburg can make an informed decision to either support or oppose 22-11. Without that level of detail, this legislation is not worthy
of your consideration and not worthy of my support.
Without sufficient detail to properly consider 22-11, we must simultaneously table consideration of 21-11.
It
is my fervent hope and
belief in the reasonableness of the developers of Clarksburg Village and Arora Hills, that they will not view defeat of these two
proposed bills as cause to immediately impose a private tax and perhaps launch an endless legal battle that will only serve to delay
needed improvements. I think that the developers may be willing to wait for a meaningful, detialed piece oflegislation that has a better
chance of earning popular support.
I hope that your thoughtful considerations of the shortcomings of the legislation before you today will earn the respect of the residents
and developers alike and that together we can solve these problems and come before you at a later date with a more acceptable,
informed and viable solution.
Thank you.