Agenda Item 24 B
May 21,2015
Action
MEMORANDUM
May 19,2015
TO:
County Council
FROM:
Robert H. Drummer, Senior Legislative
Attorney
~
SUBJECT:
Action:
Expedited Bill 16-15, Economic Development Fund - Strategic Plan ­
Amendments
. Expedited Bill 16-15, Economic Development Fund Strategic Plan - Amendments. The
Lead Sponsor is Councilmember Leventhal, and was introduced on April 14, 2015. A public
hearing was held on May 5.
Background
Bill 16-15 would change the due date for the County Executive's strategic plan for
economic development from July 1, 2015 to October 1, 2015. The change would allow for
additional stakeholder input and coordination with other current Executive Branch initiatives. The
County Executive recently announced a proposal to privatize some of the functions currently
performed by the Department of Economic Development. This announcement followed a separate
initiative to consider a reorganization of the County's workforce development service delivery
system. Delaying the due date for the strategic plan would create an opportunity for strategic plan
participants (representing community and business interests) to review any implementing
legislation to be proposed by the Executive related to the privatization or reorganization of
economic development functions currently performed by County government. Delaying the due
date also provides opportunity for the County Executive to coordinate the three efforts prior to
transmittal of the strategic plan to the County Council.
Public Hearing
Nicola Whiteman, speaking on behalf of the Apartment and Office Building Association
of Metropolitan Washington, supported the Bill to give the Executive more time to submit an
economic development strategic plan that includes reducing the fuel-energy tax. ©9-12.
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Discussion
The Executive recently proposed to privatize some of the work performed by the
Department of Economic Development. It is reasonable to delay the submission of a strategic plan
for economic development to permit the consideration of the Executive's proposal.
Council staff
recommendation:
approve the Bill as introduced.
Since this Bill did not go to Committee, it would require a motion at Council for action.
This packet contains:
Expedited Bill 16-15
Legislative Request Report
Fiscal and Economic Impact statement
Testimony ofNicola Whiteman
F:\LA W\BILLS\1516 Economic Development - Strategic Plan\Action Memo.Docx
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Expedited Bill No.
16-15
Concerning: Economic
Development
Fund - Strategic Plan - Amendments
Revised: [date]
Draft No."'OO"
Introduced:
April 14. 2015
Expires:
October 14. 2016
Enacted:
[date]
Executive:
[date signed]
Effective:
[date takes effect]
Sunset Date:
-.:..:.No=.:n~e,-----:::--~::--~_
Ch.
...118.-.
Laws of Mont. Co.
[year)
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Leventhal
AN EXPEDITED ACT
to:
(1)
extend the time for the Executive to submit an economic development strategic plan
for the County to the Council;
(2)
generally amend the law governing the economic development strategic plan.
By amending
Montgomery County Code
Chapter 20, Finance
Section 20-76
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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ExPEDITED BILL
No. 16-15
1
Sec. 1. Section 20-76 is amended as follows:
20-76. Economic Development Strategic Plan, Administration.
(a)
The Executive must submit, by method 1 regulation, an economic
development strategic plan for the County to the Council for approval
on or before [July 1, 2015] October
thereafter.
2
3
4
5
..L.
2015 and each fourth year
6
The success or progress of the strategic plan must be
7
8
9
10
11
measurable and the plan must include measures to address:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(l0)
job creation;
private sector compensation and benefits;
target industries;
target geographic areas;
workforce education and training;
growth in tax base;
economic opportunity for residents;
encouragement ofentrepreneurs and small business;
land use; and
other actions necessary to promote economic development in the
County.
12
13
14
15
16
17
18
19
*
Sec. 2.
*
*
20
21
22
Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest.
becomes law.
Approved:
This Act takes effect on the date on which it
23
24
25
George Leventhal, President, County Council
Date
€)
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LEGISLATIVE REQUEST REPORT
Expedited Bill 16-15
Economic Development Fund -Strategic Plan
-
Amendments
DESCRIPTION:
Bill 16-15 would change the due date for the County Executive's
strategic plan for economic development from July 1, 2015 to October
1,2015.
The change would allow for additional stakeholder input and
coordination with other current Executive Branch initiatives. The
County Executive announced this spring that he is considering
privatization of all or some ofthe functions currently performed by the
Department of Economic Development. This announcement followed
a separate initiative to consider a reorganization of the County's
workforce development service delivery system. Delaying the due
date for the strategic plan would create an opportunity for strategic
plan participants (representing community and business interests) to
review any implementing legislation to be proposed by the Executive
related to the privatization or reorganization of economic development
functions currently performed by County government. Delaying the
due date also provides opportunity for the County Executive to
coordinate the three efforts prior to transmittal of the strategic plan to
the County Council.
Create a better strategic plan for economic development.
DED, CAO
To be provided
To be provided
nla
nla
Jacob Sesker, Senior Legislative Analyst, Robert
H.
Drummer,
Senior Legislative Attorney
nla
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
nla
f:\law\biUs\1516 economic development - strategic plan\lrr.docx
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ROCKVILLE,
MARYIAl~l)
MEMORANDUM
May 4, 2015
TO:
George Leventhal, President. County Council
f
~.1
FROM:
StJBJECT:
Jennifer A. Hughes, Director, Office
ofManagemen~an.!Budge
Joseph F.
Beach.
Director, Department ofFi
.{
Y
FEIS
for Bill 16·15, Economic Development Fund·
Strategic
Plan ­
Amendments
Please find attached the fiscal and economic impact statements for the above·
referenced legislation.
JAH:fz
cc:
Bonnje
Kirkland,
Assistant Chief
Administrative
Officer
Lisa Austin, Offices of the County Executive
Joy Nunni, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Infonnation
Office
Joseph
F.
Beach, Director, Department of Finance
Uma Ahluwalia, Director, Department of Human Health Service
David
Platt, Department of Finance
Pofen Salem. Office of Management and Budget
Alex Espinosa, Office of Management and Budget
Naeem Mia, Office of Management and Budget
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Fiscal Impact Statement
Bill 16-15,
Economic Development Fund - Strategic Plan Amendments
1. Legislative Summary
Bill 16-15 would amend the Bill 14-12, signed into a law on
12120/2012,
and chan.ge the
due date for the County Executive's strategic plan for economic development from July
1,2015
to
on or before October 1.2015.
2.
An
estimate of changes in County revenues and expenditures regardless
of
whetber
tbe revenues or expenditures are a,."tsumed
in
the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
The changes to the due date of the strategic plan do not have a fiscal impact on revenues
or expenditures.
3.
Revenue and expenditure estimates covering at least the next
6
fiscal
years..
St.'C #2
above.
4. An actuarial analysis through the entire amortization period for each regulation
tbat would affect retiree pension or group insurance costs.
Not applicable.
5.
I"ater actions tbatmay
afft.'Ct
future revenue and expenditures
iftbereguJation
authorizes future spending.
. . . .
Not appJicable. The bill does not require future spending.
6.
An
estimate of the staff time needed
to
implement
the
regulation.
There would
be
no impact on staff time
by
extending the strategic plan due date from
July 1 to October
1.
7.
An explanation of how the addition
of
new staff responsibilities would affect other
duties.
Not applicable.
8. An estimate of costs when an additional appropriation is needed.
Not applicabJe.
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9. A description of any variable that could affect revenue and cost estimates.
Not applicable.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not
applicable.
11.
If
a bill is likely
to
have no fiscal impact, why that is the case.
Not applicable. The bill only changes the required due
date
ofthe original Bill 14-12.
12. Other fiscal impacts or comments.
None.
13. The following contributed to and concurred with this analysis (enter name and
dept.)
Peter Bang. Chief Operating Officer, Department of Economic Development
Pofcn Salem,
Management
and
Budget Specialist,
OMB
es irector
of Management and Budget
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Economic Impact Statement
BiU
16-15, Economic Development Fund - Strategic Plan - Amendments
Background:
This legislation would change the due date for the County Executive's strategic plan for
economic development from July
1, 2015
to
October
1, 2015. The
change would allow
fo.r additional stakeholder
inpu~
and coordination with other current Executive Branch
initiatives. The County Executive announced this spring that he
is
considering
privatization
of
all or some of
the
functions currently performed by the Department of
Economic Development. This announcement followed
a
separate initiative
to
consider a
reorganization of
the
County's workforce development service delivery system.
Delaying
the
due date
for
the strategic plan would create
an
opportunity for strategic plan
participants (representing community and business interest<;) to review any implementing
legislation to be proposed by the Executive related to the privatization or reorganization
of economic development functions currently performed by County government.
Delaying the due date also provides opportunity for the County Executive to c.()ordinate
the three efforts prior to transmittal ofthe strategic plan to the County Council.
1.
The
sources of information, assumptiolls, and methodologies
used.
Assumptions
are
as follows:
1)
The time delay for the submission ofthe strategic plan is a three-month delay
from July
1,2015
to October
1,2015
and the time
\\till be
used to enhance the
proposal coming from the County Executive for the operations and management
structure of the Montgomery County economic development function.
2)
The existing Department ofEconomic Development staffand associated funded
programs will continue during this three-month delay time period to promote
economic development
for
Montgomery County.
2. A description of any variable that
could
affect
the
economic impact estimates.
Uncertainty about the future economic development opportunities available within the
County does impact business decisions
about locating and/or
expanding
within
the
County. However,
as this
three-month delay
is
intended
to
help improve
the
business
attraction
and
retention
climate
~ithin
the County, it
is
anticipated that new and
existing
businesses will still make decisions to locate or expand within the County without regard
to
this
uncertainty.
3. The Bill's positive or negative effect, if any on employment, spending, saving,
investment, incomes, and property values in the County.
It
is anticipated
that
reorganization and/or privatization of
aU
or some of
the
functions
currently performed by the Department of Economic Development will enhance
economic development efforts in Montgomery County. However, as existing economic
development efforts will continue in place until changes are implemented, the County is
not expected to suffer
any
negative effects on employment, spending, savings,
investment, incomes, and property values from the minor three "month delay in release of
Page
1
of2
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Economic Impact Statement
Bill 16-15, EconoDlic DevelopmcntFund - Strategic Plan - Amendments
the new strategic plan. In fact, by obtaining input from the community and business
interests, it is expected that the
final
strategic plan will provide more effective
recommendations for the future path of economic development efforts in the County.
4.
If
a Bill
iii
likely to have no economic impact, why
is
that the case?
See response number 3.
5. The following
contribut~
to or concurred ll'ith this analysis: David Platt; Mary
Casciotti, and Rob Hagedoorn, Finance; Peter Bang, Department of Economic
Development.
3(/-fJ
Jo
F. each,
Director
Department of
Finance
Date
Page2of2
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TESTIMONY ON
"RESOLUTION TO AMEND FUEL/ENERGY TAX
RATES"
BILL 16-15 "ECONOMIC DEVELOPMENT FUND­
STRATEGIC PLAN - AMENDMENTS"
AND
BILL 8-15, "TAXATION - DEVELOPMENT IMPACT
TAX - EXEMPTIONS"
Nicola Y Whiteman, Esq.
Senior Vice President of Governntent Affairs
Apartment and Office Building Association of
Metropolitan Washington
May 5, 2015
1050 17th Street, NW Suite 300 Washington, DC 20036
p:
202.295.3390
f:
202.296.3399
www.aoba-metro.org
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Good afternoon President Leventhal and members ofthe Council. I am Nicola
Whiteman,
Senior Vice President of Government Affairs for the Apartment and Office Building Association
ofMe1ropolitan Washington (AOBA), a non-profit trade association whose members are owners
and managers of more
than
112,000 apartment units and over 33 million square feet of office
space in suburban Maryland, including over 24 million square feet of office space and more
than
57,000 apartment units in Montgomery County.
L
Resolution to Amend FuellEnergy Tax Rates
AOBA is pleased to testify in support of the resolution to amend the County's energy tax
rates.
It
is an important first step towards remedying a tax disproportionately placed on the
County's businesses by virtue ofmes that have the commercial/nonresidential sector paying
68% of the total revenue take. Understanding the effect of this tax on the County necessitates a
better understanding of who bears the burden of this tax. So who does ultimately pay this
exorbitant tax? Residents in apartment communities and commercial tenants.
Notably,
commercial tenants paying the tax include restaurants, retail stores, medical offices,
dry
cleaners
and other local, large and small businesses which contribute to the vibrancy of the County's
neighborhoods and economy and the diversification of the tax and revenue base. Commercial
office tenants can pay $8,000 to $15,000 a month. For multifamily properties, the energy tax
results in rent pressures for those building where utilities are included in the rent.
The disparity in the amount paid by the nonresidential sector is unsustainable yet the
energy tax is one which the county
has
increasingly turned to an unseemly degree to as a revenue
source, allowing it to become its third largest
tax
source. AOBA cautions that the County's
otherwise robust business attraction and retention efforts continue to be undermined by forcing
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businesses
to
shoulder the County's staggering energy tax.
1
Forcing the very businesses that are
the engine of economic activity and
growth
and source of a diverse commercial tax base to bear
a disproportionate share of the costs associated with the tax also does nothing
to
dispel the
"perception of Montgomery County as business-unfriendly."
AOBA commends the Council for its leadership in proposing to amend the energy tax
rates. However, it is important to note that the County's five-year FY 2015-2020 plan proposes
no change whatsoever to the energy tax.
2
Thus, it is necessary that the Council question the
purported rationale for the energy tax as a "broad-based revenue source
that
incudes federal
institutions based in the County who otherwise pay no taxes in exchange for County services."
AOBA urges the Council
to
require an audit of energy tax revenues to determine who in fact
is
paying in order to make an informed decision as
to
whether the pain being inflicted on
businesses and adverse impact of maintaining the energy tax on economic development
is
worth
the unspecified revenues obtained from federal institutions.
ll.
Bill 16-15 Economic Development Fund - Strategic Plan - Amendments
While the Code does not reference the energy
tax
specifically, the additional time for the
Executive to submit his economic development strategic plan provides an opportunity to discuss
remedying a tax policy clearly at odds with the County's stated economic and business
development goals. Given the current economic climate, it is important that the County develop
lNotably, the County Executive proposed a sunset provision in 2010 because the proposed increase would have
"significant
impact
•••
on County
resid4nts
and businesses.!If
April 14, 2014 Memorandum from Council Administrator Farber
to
the
Council.
2The County's FYIS-20
fisca]
plan assumes the energy
tax
"will continue for the entire ... period and will not
be
unsettled or
reduced." See Overview ofFY 15 Operating Budget, page 4, Stephen Barber, Council Administrator, April 4,. 2014.
2
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cohesive policies that will enhance its competitive position in the region.3 Doing so begins with
an analysis of how the County's tax structure, especially the energy tax, hinders economic
development and efforts to increase and diversify the commercial tax base.
III.
BillS-15 Taxation - Development Impact Tax - Exemptions
The legislation proposes to exempt the market-rate rental dwelling units in any
development which consists of at least 25% affordable housing units from the transportation and
school development impact taxes.
AOBA supports this measure which will enhance the
County's efforts to provide a continuum of housing that matches the diversity of choices and
needs in the rental housing market. Initiatives such as B8-16 promote healthy competition in the
rental market by increasing the supply of rental units, particularly affordable units and keeping
prices down.
Thank you again for considering the views and interests ofAOBA members.
~ote,
for example, that many jurisdictions in the region, including the County, are experiencing or projected to experience
doublewdigit vacancy rates as Federal and private sector tenants continue to significantly reduce their leasing requirements. See
for example, Montgomery County's vacancy rates: (1) Class A office vacancy rate is 15%; Class B
rate
is 15.7%. See January 23,
2015 Memorandum re: Public Hearing-Spending Affordability Guidelines for the FY 16 Operating Budget, page 3.
3