GO Item 2
January 29, 2015
Worksession
MEMORANDUM
TO:
FROM:
Government Operations and Fiscal Policy Committee
~
Michael Faden, Senior Legislative Attorney
Worksession:
Bill 62-14, Taxation - Development Impact Taxes - Exemption­
Ancillary Facilities
SUBJECT:
Bill 62-14, Taxation - Development Impact Taxes - Exemption - Ancillary Facilities,
sponsored by then-Council President Rice, was introduced on November 25, 2014. After the Bill
was introduced, Council President Leventhal and Councilmembers Floreen, Katz, and Riemer
added themselves as co-sponsors.
Bill 62-14 would exempt from development impact taxes certain ancillary facilities in
residential developments that do not increase the number ofdwelling units in the development and
are not open to the public, such as clubhouses, fitness centers, or administration buildings.
A public hearing was held on January 13, 2015, at which the only speaker was Philip
Marks, representing the Leisure World Board of Directors, who supported the Bill.
Mr.
Marks
noted that Leisure World had paid about $75,000 in impact taxes in 2005 for an accessory building
after having their appeal of the tax denied. They now plan to build a new fitness center, restricted
to current residents, for which the impact tax would amount to $60-90,000.
A fiscal impact statement, received from the Office of Management and Budget after the
hearing, concluded that "the amount of square footage and revenue potentially affected by this
legislation cannot be determined" because of a lack of historical data.
In Council staff's view, taxing these kinds of ancillary buildings, which are not open to the
public and therefore would not add any outside traffic, is not justified by the purposes of the
development impact tax to assess new development a fair share of the cost of new or expended
transportation facilities needed to serve that development. The school impact tax also should not
be assessed because these ancillary facilities do not add new dwelling units and therefore do not
increase the number of students in the development.
Council staff recommendation:
enact Bill
62-14 as introduced.
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Executive amendments
The County Executive, in a memo received after the hearing (see
©11-14), supported Bil162-14 but urged the Council to further amend this Bill by, among other
changes, deleting the term "social service provider" and replacing it with "charitable, philanthropic
institution", and inserting the term "cultural institution" in the same rate category as private
elementary and secondary schools. These terms were used in the recent zoning recodification, and
the Executive suggested that these amendments take effect retroactively as of October 30,2014,
when the zoning rewrite took effect.
Council staff does not recommend these amendments for several reasons.
First,
although technically they fit within the scope of advertising for this Bill because it was advertised
broadly (as most bills are, with a "generally amend ..." clause), these amendments are substantive,
effectively broadening the current law's exemptions, and have not been specifically advertised or
made the subject of any hearing. Council staff doubts that any disinterested member of the public
is even aware of them.
Second,
these amendments could potentially reduce the tax due in one or
more upcoming development applications, and the Executive did not include any revenue loss
estimates for them.
Third,
these amendments would complicate the passage of a relatively simple
bill, one that the management of Leisure World has sought for some time.
Fourth,
making
tax
law
changes, even those that broaden exemptions, retroactively as the Executive urged is uncommon
and, in our view, appropriate only when those changes are urgently needed, and we have not been
given any reason why that is the case here.
Thus, rather
than
attach these amendments to the pending Bill,
Council staff recommends
that, ifthe Executive wants to pursue them, he should transmit them to the Council to be introduced
as a separate Bill, to be given its own public hearing.
This packet contains:
Bill 62-14
Legislative Request Report
Fiscal impact statement
Memo from County Executive
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Bill No.
62-14
Conceming: Taxation - Development
Impact Taxes - Exemptions -
Ancillary Facilities
Revised: 11-18-14
Draft No. 1
Introduced:
November 25, 2014
Expires:
May 25. 2016
Enacted: _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ __
Sunset Date:
_N~o=::.n:.:::e:-
_ _ _ __
Ch, _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: COWlcil President Rice
AN
ACT
to:
(1)
(2)
exempt from development and school impact taxes certain ancillary facilities in
certain residential developments; and
generally amend the law governing impact taxes.
By amending
Montgomery COWlty Code
Chapter 52, Taxation
Sections 52-49 and 52-89
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Addedto 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. 62-14
1
2
3
4
5
6
7
8
9
Sec. I.
Sections 52-49 and 52-89 are amended as follows:
52-49.
Imposition and applicability of development impact taxes.
*
*
*
(h) The development impact
tax
does not apply to:
(1) any reconstruction or alteration of an existing building or part of
a building that does not increase the gross floor area of the
building;
ill
any ancillary building in
~
residential development that:
CA}
does not increase the number of dwelling units in that
development; and
10
11
an
is used only
~
residents of that development and their
12
13
guests, and is not open to the public; and
[(2)]
ill
any building that replaces an existing building on the same site
or in the same project (as approved by the Planning Board or the
equivalent body in Rockville or Gaithersburg) to the extent of the
gross floor area ofthe previous building, if:
(A) construction begins within one year after demolition or
destruction of the previous building was substantially
completed; or
(B) the previous building is demolished or destroyed, after the
replacement building is built, by a date specified in a
phasing plan approved by the Planning Board or
equivalent body_
However, if in either case the development impact tax that would
be due on the new, reconstructed, or altered building is greater
than the
tax
that would have been due on the previous building if
it were taxed at the same time, the applicant must pay the
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tax -
exemption - ancillary facilities\bill
1.doc
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15
16
17
18
19
20
21
22
23
24
25
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BILL
No. 62-14
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
difference between those amounts.
52-89.
Imposition and applicability of tax.
*
(d)
*
*
The tax under this Article does not apply to:
(1)
any reconstruction or alteration of an existing building or part of
a building that does not increase the number of dwelling units of
the building;
ill
any ancillary building in
~
residential development that:
(A)
does not increase the number of dwelling units in that
development; and
aD
is used only
Qy
residents of that development and their
guests, and is not open to the public; and
[(2)]
ill
any building that replaces an existing building on the same site
or in the same project (as approved by the Planning Board or the
equivalent body in Rockville or Gaithersburg) to the extent of the
number of dwelling units ofthe previous building, if:
(A)
construction begins within one year after demolition or
destruction of the previous building was substantially
completed; or
(B)
the previous building is demolished or destroyed, after the
replacement building is built, by a date specified in a
phasing plan approved by the Planning Board or
equivalent body.
However, if in either case the tax that would be due on the new,
reconstructed, or altered building is greater than the
tax
that
would have been due on the previous building if it were taxed at
the same time, the applicant must pay the difference between
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impact tax - exemption - ancillary facilities'bill 1.doc
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48
49
50
51
52
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BILL
No. 62-14
55
56
57
58
Approved:
those amounts.
*
*
*
Craig
L.
Rice, President, County Council
Date
59
60
Approved:
Isiah Leggett, County Executive
61
Date
This is a correct copy ofCouncil action.
62
Linda M. Lauer, Clerk ofthe Council
Date
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tax -
exemption· ancillary facilities\bill1.doc
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LEGISLATIVE REQUEST REPORT
Bill 62-14
Taxation
-
Development Impact Taxes
-
Exemption Ancillary Facilities
DESCRIPTION:
Would exempt from development impact taxes ancillary facilities in
residential developments that do not increase the number of dwelling
units in the development or attract members of the public, such as
clubhouses, fitness centers, or administration buildings.
Under current interpretations of County law, development impact
taxes could be charged for new or enlarged ancillary facilities in
residential developments that do not increase the number of units in
the development or the traffic to or from the development.
To clarify the application of the development impact taxes to certain
ancillary facilities.
Finance Department, Department of 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 impact taxes, which apply Countywide.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable.
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®
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Fiscal
Impact Statement
Bill 62,..14 Development Impact Taxes - Exemption -
Alli:illary
Facilities
1. Bm
Summary
Bi1l62-14 would exempt certain ancillary facilities in residential developments from
development impact taxes. Structures
that
do not increase
the
number of dwelling units
in the development and are not open to
the'
public, such as clubhouses, fitness centers, or
administration buildings, would be exempt from such taxes.
2.
An
estimate of changes in
COWlty
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.
There will be a loss of tax revenue;
however~
the exact amount cannot be detem1ined.
The
Bm
will not change County expenditures.
The County does not maintain
data
on development impact taxes collected far ancillary
facilities as described in the legislation.
Due
to the absence of specific data for the square
footage of ancillary facilities, a chart showing th.e development impact
tax
by
square
tootage
and impact tax area is provided to show patentiallast revenue from exempting
space previously
su~iect
to taxation. The square footage amounts shown below are
illustrative; the amount of square footage and revenue
potentially
affected by this
legislation cannot be determined.
I
I
Impact Tax Rates by Area
Metro Station
Clarksburg
Impact Tax
by
\8Uildin
g
Area
Other residential
{per SF GFA}
General
$3.10
$7.35
$6.15
Square
Footage
Potential
Lost
Revenue Assuming
Different
Square
..,..A_m_o_u_nts _
-+-__
_
Foo~~!
Amounts
by
Impact Tax Area for Bill 62-14
r""-'"
1,000
10,000
50,000
100,000
200,000
Metro Station
$3,100
$31,000
$155,000
$310,000
J620,OOO
Clarksburg
General
$7,350
$73,500
$367,500
$735,000
$1,470,000
$6,150
$61,500
$307,500
$615,000
$1,230,000
1
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3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
No current or hist.orical data is available for the revenue associated "vith this legislation.
4. An actuarial analysis through
th.e
entire amortization period for each regulation
that
would affect retiree pension or group insurance costs.
This is
not applicable to
this
BilL
5.
Later actions
that
may affect future revenue
and
expenditures if the legislation authorizes
future spending.
This is not applicable to this
BilL
6. An estimate
or
the staff
time
needed to implement the legislation.
Implementation of this
Bm
will
require minimal
stafftime~
7. An explanation of how the addition ofnew staff responsibilities would affect other duties.
This
is
not applicable to this BilL
8. An estimate of costs when an additional appropriation is needed.
This is not applicable to this Bill.
9. A description of any variable that could affect revenue
and.
cost estimates.
The square footage of structures meeting
the
Bill's qualifications will affect the amount
of revenue loss associated
with
this legislation. However, this is unpredic,table given the
lack of historical data.
10. Ranges ofrevenue or expenditures that are uncertain or difficult to project.
It
is difficult to predict the potential lost revenue as there are no estimates of the revenue
obtained from the a.c;soeiatedsquare footage for the ancillary facUities that are proposed
for exemption.
11.
Ira
legislation is
likely
to have no fiscal impact,
why
that is the ca.c;e.
This is not applicable
to
this Bill.
12.
Other fiscal impacts or
comments.
This is not applicable
to
this BilL
2
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13. The fbllowing contributed to and concurred with this analysis (enter name and dept.)
Robert Hagedoorn, Department of Finance
Michael Coveyou, Department of Finance
David Platt, Department of Finance
Mary Casciotti, Department of Finance
HatH Mansouri. Department of Pennitting Services
Elyse Greenwald. Oflice of Management and Budget
Dennis Hetman, Office of Management and Budget
Dat1
I
3
(j)
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Economic Intp&et Statement
Bill 62-14, Development Impact Taxes - Exemption-Ancillary Facilities
Background:
This legislation would exempt from development impact taxe.s
certain
ancillary facilities
in
residential developments that do not increase the number of dwelling units in
the
development and are not open to the public, such as clubhouses, fitness centers, or
administration buildings.
t.
The .sources of
informatio~
assumptions, and methodologies
used.
Department of Finance, Fiscal Management
staff
contacted the Department ofPennitting
Services (DPS) and Department of Finance Treasury staff to detennine if
any
information
is available
as
to the number ofpennits
and
square footage
that:
are received
for
the typc..."S
ofstructures to
be
included
in
the impact
tax
exemption.
According to DPS, since pennit and square footage data are not specifically segregated,
permits
and square footage in the legislative category cannot
be
identified. Pennit
data
are maintained by residential and commercial categories.
T
ownhome developments
which would have homeowner association sponsored facilities. such
as
swimming pools
and fitness centers, are included in the residential category and apartments or multi­
family
structures which would have similar facilities
are
contained in the
c01l1lllercial
category. Therefore, the total number of pennits and associated square footage data for
the ancillary faciJities are noi available.
2. A
description of any variable
that
could
atTed
the
economic impact estimates.
Variables would be the number of new facilities being constructed and required permits
as
well
as
the number of facilities being pennitted for redevelopment.
The location of the facilities being exempted from the impact. tax is another variable with
respect to the revenue loss ofthe County. The transportation impact
tax
has
three
non­
residential
tax rates
per square footage for
three
geographical
areas
afthe County.
Ibe
Metro
Station impact
tax
rate is $3.10 per sq. ft., for Clarksburg
it
is $7.35
pet
sq.
it.
and
for General Areas - other
than
Metro and Clarksburg - it is
$6,15
per
sq.
ft.
The
transportation tax also bas fifteen impact
tax
rates for the three geographical areas and
five building types ranging from
a
minimum of$l,228 for
a
multifamily-senior
residential dwelling unit in the Metro Station area to a maximum of $20,258 for a
single~
family detached residential dwelling unit in the Clarksburg area.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment,iDcomes, and property values in the County.
Bill 62-14 applies
to
ancillary buildings (community serving clubhouses, pool houses,
workout
rooms~
party
rooms,
etc.)
in a residential development that do not increase the
number of dwelling units in the development and that a.re only for the use of residents and
their guests. Transportation impact taxes for this
type
of use range between $3.1O!sfto
Page
10f2
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EcoDomie Impact Statement
UllI62-14, Develilpment Impact Taxes - ExempoQll-AnciUary Faeilities
$7.35/sfdepending upon location. Therefore,
for a
5,000 sq. ft.
structure.
the
cost
savings
for
a
development
or
community would
range between $15,500
and
$36,750.
For
an existing c.ommunity association, the added cost would
be
a direct pass through to
home owners or renters. For
a
new community, this cost savings
would
likely have a
small
impact,
but
would
!'esP-It
in avoided costs to either the developer or as pass-through
to
the purchasers.
Where communities are pressed for funds, this cost savings
removes
an impediment to
community investment which maintains and enhances the propeny values and quality of
life
of
a
community.
For
reasons discussed in
#1 :
above,
this legislation will reduce the County's revenue base
but
the specific impact is Wlkno\\tn.
4.
If
a Bill is likely to have no
economi~
impact; why is
that
the case?
This bill 'Will
have an economic impact; however.
110
precise
estimate
of the economic
impact can be made as no
~
are available on the number and square footage ofthe
possible future facility structures
that
would qualifY for the
exemption.
5. The
foRowing contributed to or concurred with this analysis:
David Platt,
Mary
Casciotti, and Rob Hagedoom,
Finance;
Hadi Mansouri, DPS
Page 2 of2
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----
e~
OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE. MARYLAND 20850
(t}r:
Jdr
~
I
siab Leggett
County Executive
I~ONTGOHERY
COUNTY
I I
RECEIVED
COIlt-lCIL
13D
Jz.
GD
MEMORANDUM
January 13,2015
TO:
George Leventhal, President, County Council
Roger Berliner, Councilmember
Marc EIrich, Councilmember
Nancy Floreen, Councilmember
Torn Hucker, Councilmember
Sidney Katz, Councilmember
Nancy Navarro, Councilmember
Craig Rice, Councilmernber
Hans Riemer, Councilmember
Isiah Leggett, County Ex-ecutiv
FROM:
SUBJECT: Bill 62-14, Tax-ation Development Impact Tax-es - Exemptions - Ancillary
Facilities
I am writing to express my support for Bill 62-14 that would create a limited
development impact tax exemption for ancillary buildings that do not increase the number of
dwelling units in a subdivision and are dedicated to the use and enjoyment of the residents ofthe
subdivision and their guests. This bill is consistent with the intent of development impact taxes
and I believe that the ancillary buildings contemplated may actually help reduce the drain on
transportation system capacity as the ancillary building serves the community and reduces the
need for travel to areas outside of the community for the activities provided at the accessory
building.
As the County Council considers Bill 62-14. I urge the Council to consider an
amendment that would carry forward recent definitions adopted by the Council in the Zoning
Rewrite (Zoning Text Amendment 13-04) and clarify an existing ambiguity within chapter 52
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George Leventhal, President, County Council and
Councilmembers
January 13, 2015
Page 2
with respect to "social service provider" - a term that is defined but not actually used in Chapter
52. Specifically, Zoning Text Amendment 13-04 defines "Charitable, Philanthropic Institution,"
which reflects the concept of "social service provider." To further capture the Council's intent
when that definition was created, I recommend adding a row
to
the table in Montgomery County
Code Section 52-51 providing for the Charitable, Philanthropic Institution. I also recommend
that Cultural Institutions, as defined in the Zoning Rewrite,
be
added to the table row providing
for reduced rates for private elementary and secondary schools. The educational function of
Cultural Institutions justifies treatment similar to private elementary and secondary schools.
It
would make sense for these changes
to
take effect as of the effective date of Zoning Text
Amendment 13-04 (October 30,2014).
As you consider the Bill, there are some clarifications that have been identified by
Executive staff that may be beneficial. One question that staffhas raised is why the exemption is
needed for school impact taxes which are based upon dwelling units when, by definition, the
ancillary building in the bill does not increase the number ofdwelling units. Additionally, it may
be advisable to substitute the term "subdivision" in place of "development" that is
used
in the bill
and which has a specific definition in Montgomery County Code section 52-47.
Executive staff is available to work with you as you consider these amendments.
Attachment
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Sec. 5247. Definitions.
In this Article the following terms have the following meanings:
•••
Capital improvements program (CIP) means the current adopted six-year capital improvements
program.
Charitable, philanthropic Institution means a private. tax-exemot organization whose wlmarv
fynction is
to
orovide services. research. or educational activities in areas such as health. social service.
recreation. or environmental conservation.
Cu!turallnst;tution melns any privately owned or operated structure and land where works of
ita
or other objects are !seot and displayed. or where books. periodicals, and other reading material is
offered for reading. viewing, listening. study, or reference. byt not typically offered for sale. CUltural
Institution includes a museum, cultural or art exhibit. and librarv,
Development means the carrying out of any building activity or the making of any material
change in the use of any structure or land which requires issuance of a building permit and:
(l)
(2)
Increases the number of dwelling units; or
Increases the gross floor area of nonresidential development.
•••
[[Social service provider means a locally-based, federally tax-exempt nonprofit direct provider of
social services whose primary service area is Montgomery County.]]
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Sec. 52-57. Tax rates.
(a)
The tax rates for each impact tax district, except as provided in subsection (b) 'are:·
·Editor's note-The current rates, in accordance with paragraph
(f),
below, can be obtained from the
Department of Permitting Services, 240-777-6240.
Tax per Dwelling Unitor per Square Foot of Gross Floor Area (GFA)
Building Type
Metro Station Clarksburg
General
$
$
$
$
2,750
2,250
1,750
1,250
500
2.50
1.25
0
2.25
0.15
0.20
0
1.25
$
$
$
8,250
6,750
5,250
3,750
'1,500
6
3
0
5.40
0.35
0.50
0
3
$
$
$
$
$
$
$
$
$
$
$
$
$
5,500
4,500
3,500
2,500
1,000
5
2.50
0
4.50
0.30
0.40
0
2.50
Single-family detached residential (per dwelling unit)
Single-family attached residential (per dwelling unit)'
Multifamily residential
(except high-rise) (per dwelNng 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)$
Agd !iyltu[al
iDstit!.!tjggs
Hospital (per sq.ft. GFA)
$
Other nonresidential (per sq.ft. GFA)
Cbjuitabl~, RbiiaDth[QRi~
ins.titutiQIJ
$
$
$
~
g
S
g
S
2