GO ITEM 1
September 22,
2014
Worksession
MEMORANDUM
TO:
FROM:
Government Operations and Fiscal Policy Committee
~Michael
Faden, Senior Legislative Attorney
Worksession: Expedited Bill 37-14, Real Property Transfer Tax
Enterprise Zones
Exemption­
SUBJECT:
Expedited Bill 37-14, Real Property Transfer Tax - Exemption - Enterprise Zones,
sponsored by Councilmembers Navarro, Floreen, and Riemer, Council President Rice, and
Councilmember Berliner, was introduced on July 15,
2014.
A public hearing was held on
September 9 at which no speakers appeared (but see letter from Buchanan Partners on ©7).
Bill 37-14 would exempt transfers of rezoned property located in an enterprise zone from
the 6% rezoning transfer tax. Those properties would still be subject to the underlying 1%
transfer
tax.
It
would also repeal archaic and obsolete language and references, and make
conforming and stylistic changes.
Fiscal impact The fiscal impact statement, received on September 17 (see ©8-9), did not
estimate a revenue loss from enacting this Bill because of the limited number of properties that
are likely to be affected.
Conforming amendments
In
order to reflect updated terminology in the rewritten County
zoning code which takes effect on October 30, some conforming amendments to ©2-3, lines 27-49,
shown by double brackets and underlines, are needed:
"Rezoned to a more intensive use" [shall mean] as used in this subsection means a
classification, reclassification.. or change in zone which permits a greater number of
dwelling units per acre in any residential zone, or which permits a greater number of
permitted uses regardless of area or adds more floor area in a commercial>! [[zone]]
commercial/residential. employment. or industrial zone, or is from any residential zone to
any commercial>! commerciaVresidential. emplovrnent. or industrial zone, or is from any
industrial zone to any commercial>! conunercial/residential. or employment zone.
."Rezoned to a more intensive use" [shall] does not include:
(1) A zoning from a residential zone to a [[Planned Unit Development Zone]] [under
division 59-C-7 granted after January 1, 1980J, residential floating zone if the
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(2)
(3)
approved [[development)) floating zone plan, including any amendments to the plan,
does not increase the total number of permitted dwelling units and does not permit
commercial or industrial uses, [provided however, that] but the transfer [shall] must
be subject to [additional] any tax otherwise due under this subsection if at any time
an amendment to the [[development]] floating zone plan increases the total number
of permitted dwelling units or permits commercial or industrial uses;
A zoning from a residential zone to a
commercial~
commerciaUresidential. or
employment zone within one
[(1)]
year after the property was down zoned from a
[[commercial)) zone of equal or greater intensity to a residential zone by sectional
map amendment; [or]
A rezoning from an industrial zone to a
commercial~
commercial/residential, or
employment zone which:
*
This packet contains:
Expedited Bill 37-14
Legislative Request Report
Letter from Buchanan Partners
Fiscal and economic impact statements
*
*
Circle
#
1
These amendments were suggested by Legislative Attorney Jeff Zyontz.
6
7
8
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Expedited Bill No.
37-14
Concerning: Real Property Transfer Tax
- Exemption - Enterprise Zones
Revised:
6/30/14
Draft No.
~
Introduced:
July 15. 2014
Expires:
January 15. 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _--:-:::_'--_ _ _ __
Sunset Date:
......JN~o~n!::::e
_ _ _ _ __
Ch, _ _, Laws of Mont Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Navarro, Floreen, and Riemer,
Council President Rice, and Councilmember Berliner
AN EXPEDITED ACT
to:
(1)
exempt from a certain provision of the real property transfer
tax
certain transfers of
rezoned property located in an enterprise zone;
(2)
repeal archaic and obsolete language and references, and make conforming and
stylistic changes; and
(3)
generally amend County law regarding the real property transfer
tax.
By amending
Montgomery County Code
Chapter 52, Taxation
Article II, Real Property Transfer Tax
Section 52-21
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
*
*
*
Headmgor definedrerm
Added to existing law by original bill.
Deletedfrom existmg law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffocted by bill
The County Council for Montgomery County, Maryland approves the following Act:
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ExPEDITED BILL
No.
37 -14
1
Sec 1. Section 52-21 is amended as follows:
52-21.
Levied; amount.
2
3
4
There is hereby levied a
tax
on (1) [all transfers] each transfer in the [county]
County of a fee simple interest in real property, except
£!
transfer by [way of]
mortgage, deed of trust". or deed of trust for the benefit of creditors, (2) the initial
transfer of stock or other evidence of ownership in a cooperative housing corporation
or similar entity, and (3) [all transfers] each transfer of a leasehold interest in real
property where the lease or instrument by which a leasehold interest is [demised]
transferred contains a covenant for perpetual renewal, known as ground rent. The tax
[shall] must be computed on the value of the full consideration for [such] each
transfer at the following rates:
5
6
7
8
9
10
11
12
13
14
15
16
17
*
(e)
*
*
On rezoned property, [six (6)]
Q
percent of the value of the
consideration for any transfer of real property which[, after July 1,
1971,] has been rezoned to a more intensive use at the [instance] request
of the transferor, transferee, or any other person who has or had at the
time of application for rezoning a financial, contractual or proprietary
interest in the property, [excluding] not including the value of
[improvements] any improvement constructed after [such] the rezoning.
"Rezoned" as used [herein shall mean] in this subsection means the
classification, reclassification". or change from one zone to another of
any property by local map amendment [by the county council sitting as
the district council for that portion of the Maryland-Washington
Regional District located within Montgomery County, on the "Zoning
Map of the Maryland-Washington Regional District in Montgomery
County, Maryland" dated May 31, 1958, and subsequent amendments
thereto] under Chapter 59. "Rezoned to a more intensive use" [shall
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18
19
20
21
22
23
24
25
26
27
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ExPEDITED BILL
No. 37 -14
28
29
mean] as used in this subsection means a classification, reclassification.,
or change in zone which pennits a greater number of dwelling units per
acre in any residential zone, or which pennits a greater number of
pennitted uses regardless of area in a commercial zone or industrial
zone, or is from any residential zone to any commercial or industrial
zone, or is from any industrial zone to any commercial zone.
"Rezoned
to
a more intensive use" [shall] does not include:
(1 )
30
31
32
33
34
35
36
37
38
39
A zoning from a residential zone to a Planned Unit Development
Zone [under division 59-C-7 granted after January 1, 1980], if the
approved development plan, including any amendments to the
plan, does not increase the total number of pennitted dwelling
units and does not pennit commercial or industrial uses,
[provided however, that] but the transfer [shall] must be subject
to [additional] any tax otherwise due under this subsection if at
any time an amendment to the development plan increases the
total
number of pennitted dwelling units or pennits commercial
40
41
42
43
44
45
or industrial uses;
(2)
A zoning from a residential zone to a commercial zone within
one [(1)] year after the property was down zoned from a
commercial zone of equal or greater intensity to a residential
zone by sectional map amendment; [or]
(3)
A rezoning from an industrial zone to a commercial zone which:
(i)
Is necessitated by a previously adopted amendment to [the
zoning ordinance text,] Chapter 59 that was not [upon
application or at the instance of] requested
Qy
the
transferor, transferee, owner., or fonner owner of the real
property, or by any person who has or has previously had
46
47
48
49
50
51
52
53
54
G
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ExPEDITED BILL
No. 37 -14
55
56
57
58
an interest of any kind
contractual interest; and
(ii)
ill
the property, including a
Allows establishment or continuance of a use or uses
which were permitted uses on the property under the
industrial zone immediately [prior to] before the text
amendment, to which use or uses the property was
restricted by bona fide covenants recorded among the land
records [prior to] before July 1, 1971, and which covenants
are in effect at the time of a
transfer~
or
59
60
61
62
63
64
65
66
ill
~
rezoning of any property that is located in an enterprise zone
when the property is transferred.
[The
tax
levied and imposed in this subsection shall not apply to
transfers which are made pursuant to a bona fide written contract or
agreement of sale entered into prior to July 1, 1971; provided, that the
director of finance may require satisfactory proof that the contract or
agreement was entered into prior to such date. There shall be deducted
from the consideration as defined in section 59-19 the] The taxpayer
may deduct from the consideration on which the
tax
is based any cost
[or expense]
actually
incurred by the transferor for public
67
68
69
70
71
72
73
74
75
improvements,.,. such as sewer, water, roads, sidewalks, storm drainage
structures,.,. and permanent soil erosion and sediment control measures,
[subject to the submission to the director of finance of] if the taxpayer
submits satisfactory proof of [such] costs [or expenses] documented by
certificates from public agencies where applicable[; provided, that],.,. but
the rate of [such] the
tax
on a single transfer [shall] must not exceed [six
(6)]
Q
percent of the bona fide market value consideration for the
76
77
78
79
80
81
transfer. [Where] If a transfer is subject both to the
tax
imposed by this
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ExPEDITED BILL
No. 37 -14
82
83
subsection and the tax imposed by subsection (d), the tax imposed by
this subsection [shall] must be the only tax imposed on the transfer.
Any tax collected under this subsection [shall] must
be
collected only
once after each rezoning to a more intensive use, and [all transfers] any
transfer that does not [subsequent to] follow a rezoning to a more
intensive use [shall] must
be
[taxable1 taxed at the rates applicable under
other subsections ofthis section. The [county executive] Executive may
[from time to time] issue [written] regulations under method (3) [of
section 2A-15 ofthis Code, pertaining to] regarding the collection ofthe
tax levied in this subsection.
84
85
86
87
88
89
90
91
92
93
*
Sec. 2.
*
*
The Council declares that this
Expedited Effective Date.
94
95
legislation is necessary for the immediate protection of the public interest. This Act
takes effect on the date when it becomes law.
Approved:
96
97
98
Craig
L.
Rice, President, County Council
99
Approved:
Date
100
101
Isiah Leggett, County Executive
102
This is a correct copy o/Council action.
Date
103
104
Linda M. Lauer, Clerk ofthe Council
Date
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LEGISLATIVE REQUEST REPORT
Expedite Bill 37-l4
Real Property Transfer Tax Exemption Enterprise Zones
DESCRIPTION:
Exempts transfers of rezoned property located in an enterprise zone
from the 6% rezoning transfer tax. Repeals archaic and obsolete
language and references, and makes confonning and stylistic
changes.
The current rezoning transfer tax acts as a disincentive to needed
redevelopment in enterprise zones.
To encourage redevelopment in enterprise zones
Department of Finance
To be requested.
To be requested.
To be requested.
To be researched.
Michael Faden, Senior Legislative Attorney, 240-777-7905
Transfer tax applies county-wide.
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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BUCHANAN
PARTNERS
De.elDpillg Ya""" BaU41",
Rtlatio".klp,.
September 9,2014
The Honorable Craig Rice, President
and Members ofthe Montgomery County Council
Stella B. Werner Council Office Building
100 Maryland Avenue, 5th Floor
Rockville, MD 20850
Re: Bill Number 37-14 - Enterprise Zone Rezoning Tax
Dear President Rice and Members of the Council:
We are writing
in
support of Bill Number 37-14) which proposes to exempt properties in enterprise zones
from the additional real property transfer tax of 5% imposed on privately rezoned properties (meaning
certain properties that achieved zoning via a local map amendment). As developers
in
Montgomery County
with experience in developing areas in need of revitalization, we can attest to the critical nature of an
enterprise zone designation and the important role it has played in other areas of the County. It is
noteworthy that properties in Enterprise Zones have not typically been privately rezoned, and are therefore
usually not impacted by this additional 5% transfer
tax
(as opposed to the normal 1% transfer
tax).
Properties that are rezoned as part of a comprehensive rezoning that have not been the subject of a local map
amendment
(i.e.,
a sectional map amendment) are not subject to this
tax.
As you can imagine, this tax
accounts for a substantial increase in the cost of a project that has gone through a local map amendment; by
definition, projects in enterprise zones need economic assistance to be viable, not additional costs.
The transfer
tax
on rezonings in an enterprise zone will put certain properties targeted for redevelopment at a
distinct disadvantage to other areas of the County and will work in opposition to the county's purpose of
encouraging development and economic growth. To impose this additional
tax
on projects in enterprise
zones belies common sense and is, perhaps, an overlooked flaw in the current legislation. The Bill is
supported by sound public policy and is in the public interest.
Thank you for your consideration and we respectfully request that the Council approve the Bill.
Cc:
Steven
A.
Robins,
Esq.
Pete Jervey
9841 Washingtonian Boulevard, Suite 300. Gaithersburg, Maryland 20878 •P: 301.4
J
7.05\ O. F: 301.417.\594. www.buchanapartners.com
(j)
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Fiscal Impact Statement
Expedited Bill 37-14, Real Property Transfer Tax - Exemption - Enterprise Zones
1. Legislative Summary
• This legislation would exempt from a certain provision of the
6% real
property
transfer
tax,
properties which are:
o
t.
Transferred;
o
2.
Rezoned
to
a more intensive use, and;
o
3.
Located in an enterprise zone.
• The
Bill
also repeals archaic and obsolete language and references, and makes
conforming and stylistic changes.
• Currently, only properties that are rezoned to
a
more intensive use at the request
of
the property owner are subject to the
6%
transfer tax. Properties in which
a
more
intensive use is imposed by the County are subject
to
a lesser 1
%
transfer tax.
• Properties exempted from the
6%
transfer
tax
rate under this Bill would still be
subject
to
the lesser
1%
transfer tax rate.
2.
An estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of information, assumptions, and methodologies used.
• Sources of information include the Department of Finance, Treasury Division
(Treasury).
• Using historical data over the past six fiscal years, Treasury reported 87 enterprise
zone credits. Of
that
number, seven (or eight percent of the total) transferred
ownership.
• None ofthe seven properties that transferred ownership were subject to the higher
6%
more intensive use tax, only the lesser 1
%
tax rate.
3.
Revenue and expenditure estimates covering at
least
the next
6
fiscal years.
• It is not possible to determine the fiscal impact of the
Bill
over the next six fiscal
years because of
a
number ofvariables (detailed
in
#9).
• OMB is aware of one property that will
be
affected in the future, but at this time,
the
final
terms
of the
sale
are unknown. The
fiscal
impact to
the
County will be
the
difference between the
1%
rate that the property would
be
subject
to
under this
Bill
and
the
higher
6%
rate the property is currently subject to.
• Due
to
the limited application of the legislation,
it
is unlikely that significant fiscal
impacts will
be
realized.
4. An actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
• NIA
5. Later
actions that may
affect
future revenue and expenditures iftllC bill authorizes future
spending.
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• N/A
6. An estimate ofthe staff time needed to implement the bill.
• No additional staff time would
be
required by the Department of Finance.
7. An explanation ofhow the addition of new staff responsibilities would affect other duties.
• See #6
8. An estimate ofcosts when an additional appropriation is needed.
• N/A
9. A description of any variable that could affect revenue and cost estimates.
Variables affecting revenue and cost estimates include, but are not limited to:
• Number of properties which are transferred, rezoned to a more intensive use
at the request ofthe property owner, an,d are also located in an enterprise zone
• Assessed value of properties
• Sale price ofproperties
• Transfer
tax
rates
• Impacts ofthe zoning code rewrite
• Market conditions
10. Ranges of revenue or expenditures that are uncertain or difficult
to
project.
• See #3
I 1.
If a bill is likely to have no fiscal impact, why that is the case.
• Due
to
the limited application ofthe legislation (only affecting properties that are
transferred and subject to the 6% transfer
tax,
rezoned
to
a more intensive use, and
located in an enterprise zone), significant fiscal impacts are not likely to be realized.
12. Other fiscal impacts or comments.
• N/A
l3. The following contributed to and concurred with this analysis:
• ledediah Millard, Office ofManagement and Budget
• David Platt, Department of Finance
• MichaelCoveyou, Department ofFinance
: Hughes,
Management and Budget
Di~'---­
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Economic Impact Statement
BiJl37-14, Real Property Transfer Tax - Exemption Enterprise Zones
Background:
This legislation would exempt from the 6% rezoning transfer
tax
transfers of rezoned
property located in an enterprise zone; and repeal archaic and obsolete language and
references, and make conforming and stylistic changes.
1.
The sources of information, assumptions, and methodologies used.
Sources of information include:
Treasury Division, Department of Finance,
MNCP&PC, Department of Planning,
State Department of Assessments and Taxation, and
Bureau of Labor Statistics, U.S. Department of Labor.
Each source of infonnation provided the following data and assumptions:
• Treasury Division detennined that there were eighty-seven
(87)
property tax
accounts that received Enterprise Zone credits over the past six fiscal years.
Of that number, seven accounts, or eight percent.
(8%),
transferred during that
period. However, there are no data on how many of the seven properties were
rezoned.
This economic impact statement assumes that all seven properties
were rezoned and are newly re-developed properties.
• MNCP&PC, Department ofPlanning (Planning) provided data on the ratio of
square footage to employee. The ratios are 255 square feet per office
employee. 400 square feet per retail employee, and 450 square feet per
industrial employee, and 500 square feet per "other" employee.
• The State Department of Assessments and Taxation (SDAT) provided the
square footage for each of the seven properties that received an Enterprise
Zone credit and the Department of Finance (Finance) divided the square
footage by the data provided by MNCPPC
to
deterinine the maximum number
of employees.
• The Bureau of Labor Statistics (8LS) provided the annual average pay for an
employee in the private sector for Montgomery County in 2013. The annual
average pay was $63,080 that year.
2. A description of
any
variable that could affect the economic impact estimates.
The following variables that could affect the economic impact estimates are:
• The number of rezoned properties. However, there are no data on how many
ofthe properties that transferred over the six-year period were rezoned. For
the purpose of this economic impact statement, Finance assumes that the
seven properties were rezoned,
• The ratio of square footage per employee by sector,
Page 1 of2
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Economic Impact Statement
Bill 37-14, Real Property Transfer Tax - Exemption Enterprise Zones
• The amount of square footage for rezone property, and
• The annual average pay per employee
in
Montgomery County in future years.
3. The Bill's positive or negative effect,
if
any on employment, spending, saling,
investment, incomes, and property values in the County.
Given the limited application of the proposed legislation (Le. properties in an
Enterprise Zone that are rezoned and subsequently transferred) and the limited
incentive to transfer or redevelop, it is unlikely that the subject legislation would
result in a material (""COnomic impact.
4.
Ifa
Bill is likely to have no economic impact, wby is tbat tbe case?
If Bill 37-14
has
an economic impact, such an impact on employment and wage
income would be modest at best for the reasons
cited
in paragraph #3 above.
5. The following contributed to or concurred with this analysis:
David Platt and
Michael Coveyou, Finance; ledediah Millard, Office of Management and Budget
os
each, Director
Department of Finance
Page 2 of2