AGENDA ITEM #4A
June 16,2015
Introduction
MEMORANDUM
June 12,2015
TO:
FROM:
County Council
b'OGlenn Odin, Deputy Council Administrator.
Amanda Mihill, Legislative
Attomey~4.UV
SUBJECT:
Introduction:
Bill 30-15, Taxes - Development Impact Tax for Transportation
Improvements - Amendments
On June 1 the County Executive transmitted this bill, which would: limit the enterprise zone
impact tax exemption to the time an enterprise zone is in effect; extend the limit of the life of a credit
certified after March 1, 2015 to 12 years (the limit is currently 6 years); to allow a credit for
reconstruction of an existing road where capacity is being added; and to generally amend County law
regarding impact taxes.
It
is sponsored by the Council President at the request of the County Executive.
The Executive's transmittal memo is on ©1-2, Bill 30-15 is on ©3-5, the Legislative Request Report is
on ©6-7, the Economic Impact Statement is on ©8-9, and the Fiscal Impact Statement is on © 10-11.
The public hearing on Bill 30-15 is tentatively scheduled for June 30, 2015 at 1:30. As the bill
would allow for the law to be generally amended regarding impact taxes, certain Councilmembers have
identified further proposals for which public comment is being solicited at the June 30 hearing:
Councilmember EIrich proposes including transitways as an eligible expenditure under Section
52-58. He also proposes eliminating Metro State Policy Areas (MSPAs) as a separate rate
category, and in so doing applying the General District tax rates there, except in White Flint and
in those MSPAs that are enterprise zones. Furthermore he proposes eliminating Section 52­
57(e), which sets the impact tax rates within one-half mile of the Germantown, Metropolitan
Grove, Gaithersburg, Washington Grove, Garrett Park, and Silver Spring MARC stations at 85%
ofthe General District Tax rates.
Councilmember Rice proposes eliminating Clarksburg as a separate tax district and incorporating
it into the General District.
The effect of these two sets of recommendations would be to equalize the tax rates across all geographic
areas in the County (as is the case for the Development Impact Tax for Public School Improvements),
with the exception of White Flint (where there is a special taxing district), and in active enterprise zones.
A Transportation, Infrastructure, Energy and Environment Committee worksession on Bill 30-15
and these and other potential amendments to the impact tax law is tentatively scheduled for July 20.
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MAIlYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
June 1,2015
TO:
FROM:
George Leventhal, President
Montgomery County Council
Isiah Leggett, County Executive
!f)
SUBJECT: Expedited Bill
No.~-15,
Amendments to Montgomery County Code
Chapter 52, Taxation, Sections 52-49, 52-55, and 52-58
The purpose ofthis memorandmn is
to
transmit, for the County Council's
approval, Expedited Bill
No~~-15.
Amendments to Chapter
~2
ofthe Montgomery
County Code that relate to the Development Impact Tax for Transportation
Improvements. Executive Regulation 26-13 was transmitted to the Council on June 4,
2014 with the pmpose of proposing revisions
to
the Executive Regulations for
Development Impact Tax for Transportation. The purpose ofthis regulation was to (1)
allow the Greenway Trail in Clarksburg to
be
eligible for an impact Tax credit (which
was
a condition ofthe agreement for the Clarksburg Roads settlement); (2) clarify
language related to credits for park-and-ride lots; and (3) add language for Bikesharing
sites to
be
eligible for credits.
Council staff recommended, and the T&E Committee agreed at the July
28, 2014 T&E Committee meeting, that other sections of the Regulations
be
revised to
provide credits for the full cost of an improvement where an existing road is being
realigned or expanded, as opposed to just the pro-rata share for the highway capacity
added by the newly constructed lanes (i.e., developers do not currently receive an impact
tax credit for reconstructing the existing portion ofthe road). Following consultation with
the Office ofthe County Attorney, it was determined that the best plan of action would be
to amend the County Code to reflect the Council's desire to change the approach by
which credits are certified.
As a result, revisions
to
Sections 52-49,52-55,
and
52-58 ofthe County
Code are proposed
to
respond to three additional areas of concern beyond the changes
proposed in Executive Regulation 26-13.
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George Leventhal, President
June 1,2015
Page 2
The
first
proposed amendment relates to enterprise zones. Developments
located
in
an enterprise zone are not subject to the impact tax. Enterprise zones have
their own life and once the designation
has
exceeded that life there is no reason
to
continue
to
exempt them from the imposition of the impact
tax.
Thus, existing language
under 55-49(g) (5) was amended to ensure that only currently designated enterprise zones
are exempt.
Section 52-55 ofthe Code is proposed to be amended to increase the life
of a credit from the existing 6 years
to
12 yearS. This reflects a compromise between the
existing life and a previously proposed increase to 20 years.
The final amendment involves Section 52-58 and stems from a proposed
change
in
the way the law has been applied. Under the proposed change
to
this section, in
detennining the amount of a credit for an expansion in the number of lanes that adds new
highway capacity. the cost associated with the existing lanes can be factored into the
overall calculation of the credit amount. The law has been consistently applied so
that
only the costs associated with "neW" capacity can be eligible for a credit.
In
this manner,
the cost ofproviding new lanes would be eligible but the cost ofimproving andlor
realigning the existing road has not been eligible. Under this proposed amendment, the
costs associated with both the existing
and
new lanes would be eligible for a credit in that
they all would be considered part of the cost ofmaking the eligible transportation
improvement.
The Executive Regulation that Was transmitted last year had to 'be revised
to
ensure consistency between it and the proposed Code amendments. This is reflected
in
Executive Regulation 26-13AM, that proposes revised language to account for the
increase in the life ofa credit and the ability to have a credit certified for the costs'
associated
with
improvements
to
existing lanes as well as new lanes (Section 52-58).
The amendments are transmitted for the Council's review and
consideration. Please direct any questions to Emil Wolanin ofthe Department of
Transportation at 240-777-8788.
AR:dm
,
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Bill No.
Bill 30-15
Concerning: Taxes -
Transportation
Impact Tax - Amendments
Revised:
6/1212015
Draft No.
_1_
Introduced:
611612015
Expires:
1211612016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effecwe: ____
~----------
Sunset Date: ____
~N:=.onW.le~
_____
Ch.
Laws of Mont Co. ______
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Council President at the Request ofthe County Executive
AN
ACT
to:
(1)
(2)
(3)
(4)
revise the application of the impact tax in an enterprise zone;
revise the life ofa credit certified after a certain date;
allow a credit for reconstruction ofan existing road; and
generally amend County law regarding impact taxes.
By amending
Montgomery County Code
Chapter 52, Taxation
Sections 52-49, 52-55 and 52-58
Boldface
Underlining
Heading or defined term.
Added to existing law by original bill.
[Single boldface brackets]
Double underlining
[[Double boldface bracketsD
* *
*
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.
30-15
1
Sec. I. Sections 52-49, 52-55 and 52-58 are amended ,as follows:
52-49. Imposition and applicability of development impact taxes.
2
3
4
5
6
7
*
(g)
(5)
*
*
A development impact tax must not be imposed on:
any development located in an enterprise zone currently
designated by the State [or in an area previously designated as an
enterprise zone].
8
*
52-55. Credits.
(b)
*
*
9
10
11
12
A property owner must receive 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 transportation capacity.
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 Gaithersburg.
13
14
15
16
17
18
19
*
(4)
*
*
Any
credit that was certified under this subsection on or after
20
21
22
March
1,2004,
and before February
28,2015,
expires 6 years after
the Department certifies the credit. Any credit that was certified
under this subsection on or after March
1,.
2015,
expires
12
years
after the Department certifies the credit.
23
24
25
26
*
52-58. Use of impact tax funds.
*
*
Impact tax funds may be used for any:
.c"~1
{,',tit;)
\.Y
-2­
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BILL No. 30-15
27
(a)
New
road~
[or] widening of an existing
road~
or total reconstruction of all
or part ofan existing road required as part ofwidening ofan existing road
that adds highway or intersection capacity or improves transit service or
bicycle commuting, such as bus lanes or bike lanes.
28
29
30
31
*
Approved:
*
*
32
33
George Leventhal, President, County Council
Date
34
Approved:
35
Isiah Leggett, County Executive
Date
36
37
This is a correct copy ofCouncil action.
Linda M. Lauer, Clerk ofthe Council
Date
-3­
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LWISLATIVE REQUEST REPORT
'Bill
DESCRIPTION:
'.30~i5'
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Amendments to
chapter
52
of
theMontgo~ery
County Cpde and
Cprresppnding Executive Regmatipn that relates to the ..
Development impact Tax
fPf
Transportation hnprpvements. , . '
Revlsipns tp
theCpunty,cOde,,~
the
resul~
of requeStS by Cpuncil
~
change ·the aPpr.oach by which credits
~e
certified, enSUl'e that
.only currently designated Enterprise Zqnesare exempt frpm the
impOsitipn of impact tax, and eXtend the life .of a credit from its ,
eXisting
6
years to
12
years. Ameod!p.ents tp the Executive ' '
Regulation provide guidance and clarificatipn in interpreting the
law with respect to the Certification .of impact tax credits fpr
transportatipn.
Historically,
cr~dhs
have
been
certified
fo~
the
~ost
.of
imprpvements that meet the intent .of the cpde by providing new
, transportatipn
capacity~
Asa
~sult,
the cp,stp(rqllacing .or., , "
iniprovUig existing lanes
~
()rder
tQ
add'newor addjtiorulI
lan~s
(i.e.,
2-1anestQ41anes) were not eligitJle
fo!
a
credit while
th~
cpst pf ,
pio\i~g
the twp new
tatie~
vypuld
be
eligilJle.
~.e
Council
'.
requested. that
th~code
oomodined; ,sp that
acreQit
can
be
certified
for the,total cost of the iInpri>:vooumt, This' explains the pr()pqSe4
~fumgeJoihe Chap~
'52
Qf the Cpunty Code. Th.ere
are
tWo
.
.other changes in theproppsed amendment to Chapter 52. These are
extending the life .of a credit
from
6
years tp 12 years and ensuring
that only currently designated Enterprise Zones are exempt from
the imppsitipn of impact
tax,
.
'
PROBLEM:
"!
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GOALS and OBJECTIVES:
'A
primary gpalofthe
Executi~e
Regulation is to
prpvid~
clarificatipn and guidance
as
to the interpretatipn ofthe Cpunty
Cpde.
COORDINA
nON:
Follpwing the T
&E
Cpmmittee meeting on Executive Regulation
26-13 last summer, the Office .ofthe County Attprney reconunended
that the best way to accommpdate the request .of the Council was to
amend the Cpunty Cpde and then ensure consistency to the
Executive Regulation.
In
a coprdinative effort the Department .of
Transportation wprked
with
the County Attorney tp develpp the
revisipns to the County Code and Executive Regulation.
FISCAL IMPACT
STATEMENT:
The .only fiscal impact resulting from the proposed amendment a
potential reduction in the ampunt of impact
tax
revenue that is
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collected.
This
is
a result of modifying what
is
considered
to
be
eligible for a credit in cases where an existing roadway
is
being
improved and expanded to create new capacity. By making the
cost ofthe full improvement eligible for
a
credit, the amount ofthe
credit
can
be
higher. Since the credit
is
used
in lieu ofpaying
impact
tax,
the fiscal
impact
would
be
less
tax
collected, thereby
reducing the revenue
to
be
collected and having less revenue
available for transportation improvements.
.
ECONOMIC IMPACT:
EVALUATION OF THE
RESULTS OF THE
PROPOSED
LAW:
There
is
no direct economic impact resulting from the proposed
changes
to
the Code and Executive Regulation.
The proposed changes
to
the County
Code
would result in extending
the life of a credit from
6 to 12
years, ensuring that only currently
designated enterprise zones
can be
exempt from impact
tax,
and
under certain conditions
to
expand the amount of a credit
to
include
. the cost ofimproving the existing roadway as well
as
constructing
new lanes.
EXPERIENCE
ELSEWHERE:
SOURCES OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A
N/A
Chapter 52 is applicable to the municipalities of Rockville and
Gaithersburg as well as the remainder ofthe county.
N/A
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Economic Impact Statement
~iIl"'IS,
Concerning Taxes - Transportation Impact Tax - Amendments
Background:
This legislation would limit the application ofthe impact
tax
in
an enterprise zone, limit
the life of a credit certified after March 1,2015
to
12 years, and allow a credit for
reconstruction of an existing road.
1'0
Billlffl.-15 would not impact any develo:gwent located in an enterprise zone
that
is
currently designated by the State. Bill :#Rf:.15 amends Section 52-55 ofthe County Code
by doubling the life of a credit certified on or after March 1, 2015 to twelve years
instead
of six yearS"for credits that were certified between March 1,2004, and February 28,2015.
I. The sources of information, assumptions, and methodologies used.
Sources of information include the Department of Transportation (DOn and the
Department of Permitting Services (DPS). According to data provided by DPS, the
amount oftinused credits outstanding is $45.5 million from transactions between
April 30, 2008, and Apri130, 2015. Since specific data on the
start
ofthe transaction
is not available, the Department of Finance assumes that the amount of credit
available
is
an average of approximately $6.5 million per year. Using this assumption
and the
first
transaction period occurring between April 30, 2008,
and
April 29, 2009,
the first set ofcredits under the six year limit
has
expired with the remaining $39.0
million of available credits remaining under the current six-year
limit
Given the
assumption ofthe $6.5 million average credit available per year, the remaining credit
amount
will
expire by 2021. Since it is uncertain what the amount ofcredits are that
will be available starting on March 1, 2015 with the twelve-year time life, the
economic impact on the developers' impact
tax
liability and business income cannot
be estimated with any specificity.
2. A description of any variable that could affect the economic bnpact estimates.
The variable that could affect the economic impact estimates attributed to Bill ##-15
is the amount of credits available starting
with
the transaction date ofMarch 1,2015
and a credit life of twelve years. Certainly by extending
the
life ofthe credit from six
to twelve years, it will have some economic impact on business revenues but that
impact is dependent on the number of development projects and the costs of such
projects incurred by developers over the twelve year period and whether such
extension
will
encourage more development. Since
that
information is not available
on specific future development, it is uncertain with any specificity what the economic
impact on business revenue, investment, and property values will
be.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
inv~tment,
incomes, and property values in the County.
Bill ##-15 could have a positive economic effect on business revenue and income, but
without specific data as stated in paragraph #2, it is uncertain with any specificity
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(i)
Page 1 of2
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Economic Impact Statement
Bill ##-15, Concerning Taxes - Transportation Impact Tax - Amendments
what the amount ofthat impact will be. By extending the .life ofthe credit, Bill ##-15
could delay annual.project development by spreading such development over a
twelve-year rather
than
a six-year period and have an effect on short-term business
income, investment, and property values but not on the long-term effect.
4.
If
a Bill
is
likely to have no economic impact, why is that the case?
Please see paragraph #3.
5. The following contributed to or concurred
with
this
analysis: David Platt and Rob
Hagedoom, Finance; David Moss, Department of Transportation.
Date
Department of Finance
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Fbcal Impast Statement
.Bill.3O· IS
Taxes - Transportation Impact Tax - Amendments
1. Legislative
Bill
Summary
The proposed amendments to Chapter 52 ofthe Montgomery County Code relate to the
Development Impact Tax for Transportation Improvements. Revisions
to
the County
Code are the result of requests by Council
to
change the approach by which impact tax
credits are certified, ensure that only currently designated Enterprise Zones are exempt
from the imposition of impact
tax,
and extend the life of a credit from its existing
6
years
to
12
years.
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.
The proposed bill does not directly impact County revenues and expenditures at this time.
The proposed bill changes the method of calculation of impact tax credits for eligible
capital projects.
It
is difficult to estimate which capital projects are eligible or how large
the impact tax credit to a developer is; tax credits are determined by the developer's costs
in constructing the improvement (in lieu ofpaying the impact tax).
Any increase in the impact tax credit would result in a decrease in impact
tax
revenues to
the County; this change is difficult to quantify until the eligible improvement and amount
ofthe creditis identified.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
See item #2 above.
4.
An
actuarial analysis through the entire amortization period for each regulation
that would affect retiree pension or group insurance costs.
Not Applicable.
S. Later actions that may affect future revenue and expenditQres
if
the regulation
authorizes future spending.
None.
6. An estimate of the staff time needed to implement the regulation and/or Code.
The staff time needed to implement the Code modifications does not change; the
proposed bill provides clarification as to what is required in order for an impact tax credit
to
be certified.
7.
An
explanation of how the addition of new staff responsibilities would affect other
duties.
The proposed bill does not create new staff responsibilities.
8.
An
estimate of costs when an additional appropriation b needed.
Not Applicable.
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9. A description of any variable that could affect revenue
and
cost estimates.
The number of eligible capital improvements and the size ofthe impact
tax
credit are the
primary variables which could affect revenue
and
cost estimates for the proposed bill.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Changes
in
impact tax revenues are difficult to project as the number ofcredit-eligible
projects and the size ofthe credit is unknown.
11.
If
a regulation or revision to the County Code is likely to have no fiscal impact, why
that is the case.
The proposed regulation serves the purpose ofproviding clarification, guidance, and
direction
as
to what requirements must be met in order for an impact tax credit to be
certified
for certain specific types of improvements (hiker-biker trail, transit
center,
park­
and-ride, and bikesharing).
It
also provides guidance
in
determining the amount of a
credit to
be
certified for these improvements.
Current County
laws
and regulations
state
that
adding
only
new
roadway capacity (i.e.,
adding a new lane) was eligible for impact tax credit. The proposed bill revises current
law such that improvements to
existing
lanes are eligible for credits, resulting
in
larger
credit than in the past. Since the credit is used in lieu ofpaying
imp~ct
tax,
the fiscal'
impact would be that less impact tax revenues are collected.
12. Other
fIScal
impacts or comments.
None.
13. The foUowmg contributed to this analysis:
Emil Wolanin, Department of Transportation
David Moss, Department of Transportation
Scott Foncannon, Office of County Attorney
Brady Goldsmith, Office ofManagement and Budget
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es, Director
agement and Budget
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