Agenda Item 12
July 12,2011
Public Hearing
MEMORANDUM
TO:
FROM:
County Council
~ichael
Faden, Senior Legislative Attorney
&oGlenn Orlin, Deputy Council Staff Director
Public Hearing:
Bill 21-11, Taxes - Transportation Impact Tax - Credits
SUBJECT:
Bill 21-11, Taxes - Transportation Impact Tax - Credits, sponsored by Councilmembers
Floreen and Rice, was introduced on June 21, 2011. A Government Operations and Fiscal Policy
Committee worksession will be scheduled at a later date.
Bill 21-11 would implement recommendations 3-6 of the Clarksburg Infrastructure
Working Group, submitted to the Council on April 13 (see report excerpts on ©5-6). All
recommendations apply to the credits allowable to developers under the transportation impact
tax, and most of the recommendations would apply only to the Clarksburg impact tax district.
Councilmember Rice would amend ©2, line 27, to replace any with the Clarksburg, so
that impact tax credits could be transferred only to other properties in the Clarksburg impact tax
district, rather than County-wide. Councilmember Floreen expressed her intent to consider
expanding the availability of impact tax credits for capacity improvements to state roads outside
the Clarksburg impact tax district; under this Bill credits for state road improvements would be
limited to roads located in or adjacent to Clarksburg (see ©2, lines 15-17).
This Bill does not implement recommendation 7 of the Working Group (see ©6). That
recommendation would 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 in
the Town Center area. 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 County for damages claimed as a result
of the County's cancellation 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.
This packet contains:
Bill 21-11
Legislative Request Report
Clarksburg Working Group report (excerpts)
F:\LAW\BILLS\11211mpact Tax - Credits\PH Memo.Doc
Circle
#
1
4
5
 PDF to HTML - Convert PDF files to HTML files
Bill No.
21-11
Concerning:
Taxes - Transportation
Impact Tax - Credits
Revised: 6-15-11
Draft No. 1A
Introduced:
June 21,2011
Expires:
December 21,2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ _ __
Effective:
_~:--
_ _ _ _ _ __
Sunset Date: -:...::.No=n..:.;:e"--_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers 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.
Deletedjrom existing law by original bill.
Added by amendment.
Deletedjrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
 PDF to HTML - Convert PDF files to HTML files
1
2
3
4
5
6
Sec.
1. Section 52-55 is amended
as follows:
52-55.
Credits.
*
*
*
(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
7
8
9
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
f!
State road that is
located in or adjacent to the Clarksburg impact tax district.
10
11
12
13
14
15
16
17
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
*
*
*
However, the owner of
f!
(e) A refund must not be granted when any credit certified under this
Section exceeds the applicable tax.
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
27
F:\LAW\BILLS\1121 Impact Tax - Credits\Bili I Doc
 PDF to HTML - Convert PDF files to HTML files
BILL
NO. 21-11
28
29
30
31
32
33
34
Approved:
entitled to the amount of credit transferred to
!1
!ill
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 of that credit under subsection
ili1
*
*
*
35
Valerie Ervin, President, County Council
Date
36
Approved:
37
Isiah Leggett, County Executive
Date
38
This is a correct copy ofCouncil action.
39
Linda M. Lauer, Clerk ofthe Council
Date
F:\LAW\BILLS\1 121 Impact Tax Credits\Bill I.Doc
 PDF to HTML - Convert PDF files to HTML files
LEGISLATIVE REQUEST REPORT
Bil121-11
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 lMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable.
f:\law\bills\1121 impact tax - credits\legislative request report.doc
®
 PDF to HTML - Convert PDF files to HTML files
2. Do not establish a special taxing district for the Clarksburg Town Center (2-9-0).
Those opposing a special tax district for AHICV oppose a special tax for CTC for the same
reasons. Many of those supporting the special tax for AHlCV 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-can be re-started.
3. Extend the time period that a developer can use impact tax credits from
6
years to 20
years (11-0-0).
Currently the law requires that any credit be applied within 6 years after DOT
I
has certified it. The Group unanimously believes that the 6-year use-it-or-Iose-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 (10-1-0).
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
 PDF to HTML - Convert PDF files to HTML files
,
.,
I
.,1
'
6. For Clarksburg only, designate other types of roads for impact tax credits that are
not eligible currently (8-3-0).
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, even without adding travel lanes.
i
;1
i
1
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.
8. Forgive the
$1.6
million that would have been paid by the eTC 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.
i
i
D. Future Steps
Should the Council concur with the Group's proposals,
it
would enact a bill amending the
DevelopmenfImpact Tax: law to incorporate the recommended provisions. Furthennore, 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, if the 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 perfonned the analysis of several special taxing district options
pro bono.
18