Agenda Item 5
June 21, 2011
Introduction
MEMORANDUM
TO:
FROM:
SUBJECT:
County Council
~Michael
Faden, Senior Legislative Attorney
Introduction:
Bill 22-11, Special Taxing District
Clarksburg Area
Bill 22-11, Special Taxing District Clarksburg Area, sponsored by Councilmembers
Floreen and Rice, is scheduled to be introduced on June 21,2011. A public hearing is tentatively
scheduled for July 12 at 1:30 p.m.
Bill 22-11 would create a Clarksburg Area Special Taxing District, consisting of the
Clarksburg Village and Arora Hills subdivisions. Precise boundaries will be inserted in the Bill
before it is acted on, but were not available when this draft went to print. This special taxing
district was recommended by the Clarksburg Infrastructure Working Group as an alternative to
the private infrastructure charge which was attached to the deeds of properties in these
subdivisions. For a fuller discussion, see the Working Group report excerpt on ©12.
The Bill would authorize the levy of an ad valorem property tax to fund transportation
infrastructure improvements that are specified in an implementing resolution, to be introduced
later, and authorize the issuance of a certain type of bond to finance certain transportation
infrastructure improvements. This Bill is based on Bill 50-10, enacted on November 30, 2010,
which created a similar special taxing district in White Flint.
Council staff inserted more general language in the Bill's long title (purpose clause) to
give the Council added leeway to restructure the financing mechanism or otherwise amend the
Bill as necessary.
This packet contains:
Bill
22-11
Legislative Request Report
Clarksburg Infrastructure Working Group report (excerpt)
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Bill No.
22-11
Concerning: Special Taxing District -
Clarksburg Area
Revised: 6-15-11
Draft No. 1
Introduced:
June 21! 2011
Expires:
December 21! 2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: -!.,!No:::.:n,!.l:e:...-_ _ _ _ __
Ch, _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Floreen and Rice
AN
ACT to:
(1)
(2)
(3)
(4)
(5)
establish a Clarksburg Area Special Taxing District;
authorize the levy of an
ad valorem
property tax to fund certain transportation
infrastructure improvements;
authorize the issuance of a certain type of bond to finance certain transportation
infrastructure improvements;
generally authorize a Clarksburg Area Special Taxing District; and
generally amend or supplement the laws governing the use of infrastructure
financing districts and similar funding mechanisms.
By adding
Montgomery County Code
Chapter 68D, Clarksburg Area Special Taxing District
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing lmv
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. 22-11
1
Sec 1. Chapter 68D is added as follows:
Chapter 68D. Clarksburg Area Special Taxing District.
68D-l.
Definitions.
2
3
4
For purposes ofthis Chapter, the following terms have the meanings indicated:
Bond
means
~
special obligation or revenue bond, note, or other similar
instrument issued
Qy
the County that will be repaid from revenue
generated
Qy
ad valorem taxes levied under this Chapter.
Cost
means the cost of:
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10
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ill
the
construction,
reconstruction,
and
renovation
of any
the
transportation
infrastructure
improvement,
including
acquisition of any land, structure, real or personal property, righh
right-of-way, franchise, or easement, to provide
infrastructure improvement for the District;
~
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transportation
ill
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all machinery and equipment needed to expand or enhance
transportation infrastructure improvement for the District;
financing charges and debt service related to
~
~
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transportation
infrastructure improvement for the District, whether the charge or
debt service is incurred before, during, or after construction of the
transportation infrastructure improvement, including the cost of
issuance, redemption premium
(if
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ill1Y1
and replenishment of
~
debt service reserve funds for any bond that finances
transportation infrastructure improvement for the District;
(12
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reserves for principal and interest, the cost of bond insurance, and
any other
~
of financial guarantee, including any credit or
~
liquidity enhancement, related to
improvement for the District;
transportation infrastructure
26
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BILL
No. 22-11
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architectural, engineering, financial, and legal services related to
providing
f!
transportation infrastructure improvement for the
District;
®
any plan, specification, study, survey, or estimate of costs and
revenues related to providing
f!
transportation infrastructure
improvement for the District;
ill
any administrative expense incurred
Qy
the County necessary or
incident to determining whether to finance or implement a
transportation infrastructure improvement for the District; and
tID
any other expense incurred
Qy
the County necessary or incident
to building, acquiring, or financing
f!
transportation infrastructure
improvement for the District.
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District
means the Clarksburg Area Special Taxing District created
under Section 68D-2.
Transportation infrastructure improvement
means:
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the construction, rehabilitation, or reconstruction of
f!
road, street,
or highway that serves the District, including any:
CA)
right-of-way;
roadway surface;
roadway sub grade or shoulder;
median divider;
drainage facility or structure, including any related
stormwater management facility or structure;
LID
(Q
CD)
ill.)
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(Q)
roadway cut or fill;
guardrail;
bridge;
highway grade separation structure;
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BILL
No. 22-11
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(IQ
tunnel;
overpass, underpass, or interchange;
entrance plaza, approach, or other structure that is an
integral part of
~
street, road, or highway;
OJ
(M)
bicycle or walking path;
designated bus lane;
sidewalk or pedestrian plaza;
streetscaping and related infrastructure; including placing
utilities underground; and
®
(0)
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(Q)
other property acquired to construct, operate, or use
street, or highway; and
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road,
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transit facility that serves the needs of the District, including
any:
(A)
track;
right-of-way;
bridge;
tunnel;
subway;
rolling stock;
station or terminal;
parking area;
related equipment, fixture, building, structure, or other real
or personal property; and
ill)
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(Q}
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(Q)
.em
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service intended for use in connection with the operation
of
~
transit facility, including rail, bus, motor vehicle, or
other mode oftransportation.
68D-2.
Creation; Boundaries.
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BILL
No.
22-11
81
The Clarksburg Area Special Taxing District consists of the Clarksburg
Village and Arora Hills subdivisions.
The properties in the District are shown on the list attached as
Attachment
&
which is incorporated in this Section.
Attachment A to
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fOllow.
68D-3.
.!.&YY
of Tax; Limits.
Each tax year the County Council may
W
kIT
against all
the assessable
real and personal property in the District
~
sum on each $100 of
assessable property that does not exceed an amount sufficient to cover
the costs of transportation infrastructure improvements that have been
identified in
~
Council resolution approved under Section 68D-4.
Under Section 9-1302 of Article 24, Maryland Code, the limit in
Charter Section 305 on levies of ad valorem taxes on real property to
finance County budgets does not
mmlY
to revenue from any tax imposed
under this Chapter.
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@
The tax imposed under this Chapter must be levied and collected as
other County property taxes are levied and collected.
The tax imposed under this Chapter has the same priority, bears the
same interest and penalties, and in every respect must be treated the
same as other County property taxes.
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100
10]
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103
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Paying the tax imposed under the Chapter does not entitle any person to
claim
~
credit against any other tax that the County imposes, including
the development impact tax for transportation improvements imposed
under Section 52-49 or the development impact tax for public school
improvements imposed under Section 52-89.
105
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BILL
No. 22-11
106
68D-4.
Transportation Infrastructure Improvement Resolution.
After holding
£!
public hearing, the Council may approve
£!
resolution
that lists each transportation infrastructure improvement that would be
entirely or partly paid for
~
£!
tax imposed under Section 68D-3.
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!ill
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(hl
The resolution must indicate the estimated cost, including
£!
contingency
amount, for each listed improvement.
ill
@
The Council may amend the resolution after holding
£!
public hearing.
The Council must present the resolution and each amended resolution to
the Executive for approval or disapprovaL If the Executive disapproves
£!
resolution within 10 days after it is transmitted to the Executive and
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the Council readopts the resolution
~
£!
vote of
.Q
Councilmembers, or if
the Executive does not act within 10 days after the resolution
transmitted, the resolution takes effect.
IS
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W
Before the Council holds
£!
public hearing under subsection
the Executive should transmit to the Council:
!ill
or
1£1
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£!
list of recommended transportation infrastructure improvements
to be entirely or partly paid for
68D-3;
~
£!
tax
imposed under Section
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the estimated cost, including
f!
contingency amount, for each
listed improvement; and
ill
ill
an estimated tax rate for each tax to be imposed under Section
68D-3.
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129
Before the County loans or advances any funds to the District that the
District is required to repay to the County, the Council must adopt
£!
repayment plan in
£!
resolution under this Section, or as part of an
approved Capital Improvements Program resolution, that specifies:
l30
l31
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BILL
No. 22-11
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ill
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each
tr~nsportation
infrastructure improvement for which funds
would be advanced;
the amount of funds advanced which the District must repay;
the expected rate of interest, if any, the District must repay;
the time period during which the District is expected to repay the
amount due; and
any other principal term of repayment.
Any repayment plan adopted under this subsection is binding on the
District and the County, except as later modified in
§:
Council resolution.
68D-S.
District Fund.
!ill
The Director of Finance must establish
§:
separate fund for the proceeds
collected from any tax imposed under this Chapter. The proceeds of
any tax imposed under this Chapter must be pledged to and paid into
this fund.
(hl
The Director of Finance must use this fund only to
~
the cost of any
transportation infrastructure improvement related to the District.
W
If in any fiscal year
§:
balance remains in the fund, the Director of
Finance may use the balance to:
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the cost of any transportation infrastructure improvement for
the District;
create
§:
reserve to
~
the future costs of any transportation
infrastructure improvement for the District;
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bond-related obligations or retire bonds then outstanding; or
into
§:
sinking fund required
!IT
the
terms of bonds which
finance the cost of any transportation infrastructure improvement
for the District that may be incurred or accrue in later years.
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BILL
No.
22-11
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68D-6.
Issuing Bonds.
Before the County issues any bond payable from ad valorem taxes
levied under Section 68D-3, the Council must adopt
~
resolution
authorizing the issuance of bonds that meets the requirements of this
Section.
ill
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(hl
Each resolution under this Section must:
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describe the
~
of transportation infrastructure improvements
and related costs to be financed; and
specify the maximum principal amount of bonds to be issued.
!£l
Each resolution may specify, or authorize the Executive
Qy
executive
order to specify:
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ill
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(Ql
the actual principal amount ofbonds to be issued;
the actual rate or rates of interest for the bonds;
how and on what terms the bonds must be sold;
how, when, and where principal
Q.h
and interest on, the bonds
must be paid;
when the bonds may be executed, issued, and delivered;
the form and tenor of the bonds, and the denominations in which
the bonds may be issued;
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how any or all of the bonds may be called for redemption before
their stated maturity dates;
tID
{2}
the nature and size of any debt service reserve fund;
the pledge of other assets in and revenues from the District to 00
the principal of and interest on the bonds;
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(lQ}
any bond insurance or any other financial guaranty or credit or
liquidity enhancement ofthe bonds; and
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BILL
No. 22-11
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.Ql}
any other provision consistent with law that is necessary or
desirable
to
finance
any
transportation
infrastructure
improvement that has been identified in
£!
Council resolution
approved under Section 68D-4.
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ill
The County must covenant to levy ad valorem taxes against all
assessable real and personal property in the District at
£!
rate and
amount sufficient in each year when any bonds are outstanding
to:
fA)
provide for the payment of the principal
Qb
interest on, and
redemption premium if any, on the bonds;
!.ID
{Q
replenish any debt service reserve fund established with
respect to the bonds; and
provide for any other purpose related to the ongomg
expenses of and security for the bonds.
ill
The County further must covenant, when any bond is
outstanding, to enforce the collection of all ad valorem taxes
under this Chapter as provided
Qy
applicable law.
W
All proceeds received from any issuance of bonds must be applied
solely towards costs of the transportation infrastructure improvements
listed in the resolution adopted under Section 68D-4, including the cost
of issuing bonds and payment of the principal
Qb
interest on, and
redemption premium if any, on the bonds.
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209
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The bonds issued under this Chapter:
ill
are special obligations of the County and do not constitute
£!
general obligation debt of the County or
£!
pledge of the County's
full faith and credit or the County's general taxing power;
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BILL No. 22-11
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m
ill
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(g)
may be sold in any manner, either at public or private sale, and on
terms as the Executive approves;
are not subject to Sections 10 and
Code; and
must be treated as securities to the same extent as bonds issued
under Section 9-1301 of Article 24, Maryland Code.
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of Article
31, Maryland
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To the extent provided
Qy
law, the bonds, their transfer, the interest
payable on them, and any income derived from them, including any
profit realized on their sale or exchange, must be exempt at all times
from every kind and nature of taxation
Qy
the State of Maryland and any
county or municipality in Maryland.
au
The bonds must be payable from the fund required under Section 68D-5
and any other asset or revenue of the District pledged toward their
payment. When any bond is outstanding, the monies in the fund are
pledged to
QID:
the costs of any transportation infrastructure
improvement funded entirely or partly
Qy
the proceeds of the bonds,
including the costs of issuing the bonds and payment of the principal
interest on, and redemption premium if any, on the bonds. In addition
to ad valorem taxes, the bonds may be secured
Qy
any other asset in or
revenue generated in the District.
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68D-7.
Any ad valorem tax imposed under this Chapter must not be accelerated
because of any bond default.
Expiration of district.
Any special taxing district created under this Chapter expires
Qy
operation of
law 30 days after the cost of all transportation infrastructure improvements identified
in g Council resolution approved under Section 68D-4, including all outstanding
bonds and cash advances made
Qy
the County, have been paid.
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LEGISLATIVE REQUEST REPORT
Bill 22-11
Special Taxing District Clarksburg Area
DESCRIPTION:
PROBLEM:
Creates a Clarksburg Area Special Taxing District, consisting of the
Clarksburg Village and Arora Hills subdivisions.
Need to fund certain transportation improvements benefiting certain
subdivisions in Clarksburg.
To create a special taxing district as an alternative to private
infrastructure .charges in certain subdivisions.
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
To be requested.
To be requested.
To be requested.
To be researched.
Michael Faden, Senior Legislative Attorney, 240-777-7905
Applies only in certain subdivisions in Clarksburg.
Not applicable.
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Option 4: This is the same as Option 2, except that the retail rate has been increased by a
factor of 6, and then all of the other tax rates have been proportionately scaled back to
collect only enough money to support about $33 million in bond proceeds.
Option 5: This option also increased the retail rate by a factor of 6 initially, and then
scaled back all of the other tax rates to support $25 million in bond proceeds for AHlCV.
If these same tax rates were applied to CTC, they would generate enough funds to
support about $6.75 million, only $750,000 more than the option in Table
1.
A special taxing district would be implemented with enabling legislation and an initial
resolution, and later annual resolutions setting the tax rates, all approved by the CounciL
Recommendations
In this section, votes are shown in parentheses as (Yes-No-Abstain). The votes of each
member, by issue, are shown in Table 5.
1. Establish a special taxing district for Arora Hills and Clarksburg Village (6-5-0).
A
slim majority favors establishing a special taxing district to pay for a share of the transportation
projects that are conditions of Elm Street's (Clarksburg Village) and Clarksburg Skylark's
(Arora Hills, also known as Greenway Village) subdivision approvals. The rates would be set to
generate the balance of what Elm Street and Clarksburg Skylark need to get $25 million in
benefit, beyond the other recommendations listed below. For example, if the combination of
recommendations #4-6 (below) were to generate $10 million in benefits for Elm Street and
Clarksburg Skylark, then the special district tax would be set to generate the $15 million balance.
If they were to generate $5 million in benefits, then the tax would be set to generate $20 million.
Those favoring the taxing district point to the fact that the tax would be about 40% less
than the private infrastructure charge that Elm Street and Clarksburg Skylark would levy
otherwise to recoup some of their expenditures. The tax would be lower because bonds issued
by the County would have a lower debt service than the interest on private loans carried by the
developers, so the cost reduction can be passed on to the homeowners. Furthermore, mortgage
financing may be more costly for future homebuyers because their purchase mortgage loans
would be second mortgages, rather than first mortgages subject to a higher tax lien. It is also
more likely that at least a portion of a special district tax would be deductible from Federal
income taxes, while this would not
be
the case with a private infrastructure charge.
Those opposing the taxing district believe that since it is likely the developer'S home
prices and impact
tax
credits accounted for their development costs, it is unfair for the developer
to pass on any of his costs again to the homebuyer through a special district tax. Instead, he
should be entirely responsible for footing the bill. Furthermore, since the AHlCV developers
have not specified the $25 million of spending for which they would be reimbursed by the
special tax, concerns exist about whether together the special tax proceeds and impact tax credits
will create overlapping reimbursements.
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