Agenda Item 9
September 20, 2016
Public Hearing
ADDENDUM
MEMORANDUM
September 19,2016
TO:
County Council
FROM:
Robert H. Drummer, Senior Legislative Attorney
fii!J
SUBJECT:
Public Hearing/ADDENDUM:
Bill 31-16, Taxation - Urban Agricultural Tax
Credit - Established
The Office of Management and Budget (OMB) and the Department of Finance sent the
Fiscal and Economic Impact Statement after the publication ofthe Public Hearing packet. See
©
1.
OMB noted that there are approximately 36,300 taxable properties between lh and 5 acres that are
not zoned as agricultural properties. However, OMB could not determine how many of these
properties are currently used for "urban agricultural purposes." Ifeach ofthese properties qualified
for the tax credit, which is unlikely, the total loss of tax revenue could be $436.4 million in FY17.
The large potential tax credit discussed in the FEIS points out the need to better define and possibly
limit the eligibility for the tax credit.
This packet contains:
Fiscal and Economic Impact Statement
Circle
#
1
F:\LAW\BILLS\163 I Urban Agricultural Tax Credit\PH-Addendum Memo.Docx
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ROCKVILLE, MARYLAND
MEMORANDUM
September 16, 2016
TO:
FROM:
Jennifer
A.IIJtWE~~~~tor,
Office ofManagement and Budget
Alexandre
a, Director, Department of Finance
FEIS for Council Bil131-16, Taxation - Urban Agricultural Tax Credit­
Established
SUBJECT:
Please fmd attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH:mc
cc: Bonnie IGrkland, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Alexandre A. Espinosa, Director, Department of Finance
Mike Coveyou, Department ofFinance
Jane Mukira, Office ofManagement and Budget
Naeem Mia, Office ofManagement and Budget
(f)
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Fiscal Impact Statement
Bill 31-16, Taxation - Urban Agricultural Tax Credit - Established
1. Legislative Summary
Provides for a real property
tax
credit for "urban agricultural" property, defmed as
properties that are not agriculturally zoned, that are between Y2 and 5 acres, that are used
for "urban agricultural purposes" and that are in State-defined Priority Funding Areas.
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.
Using the 2016 billing data from the County's property
tax
database, there are over
36,300 real property
tax
accounts that are: (1) taxable; (2) between Y2 and 5 acres; and (3)
are not zoned as agricultural properties. Most ofthese properties are likely located in
Priority Funding Areas, as most ofthe County's parcels are located in Priority Funding
Areas.
There is no data on how many of these properties are currently used for "urban
agricultural purposes." Additionally, the bill does not articulate whether each property
must be used in whole for agricultural purposes, or
if
the bill applies to a property
if
any
part ofthat property is used for agricultural purposes. The total amount of County taxes
billed for these 36,300+ accounts is over $436.4 million dollars for FYI7. Some portion
of this amount of
tax
will
be
credited, but it
is
not possible to reliably estimate how many
properties will be eligible for the credit.
Since the bill is vague as to what is defined as urban agricultural purpose, a very broad
level and array of activities could qualify a property for this proposed
tax
credit.
Therefore, the potential FIS, is the total tax revenue associated with these properties ­
$436.4 million.
This legislation requires that the Department ofFinance (Finance) administer the bill.
However, Finance does not have expertise to determine whether a property
is
used for an
"urban agricultural purpose." Therefore, Finance would have to
hire
additional staffwith
expertise in ''urban agricultural purposes" including crop production activities,
environmental mitigation activities, and community development activities. Further,
Finance would have to hire addition8I staff
to
make site visits to determine
if
a property
has
a temporary produce stand on it. The required number of new Finance staff cannot be
determined at this time because it is unknown how many property owners would
be
eligible
and
apply for the credit. However, with 36,300 eligible properties, the workload
would be significant since it would require not only initial verification, but periodic
checks to ensure the agricultural use continues.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
See #2 above.
As
noted above, there is the potential for a broad array of activities to be
eligible for this
tax
credit.
If
all 36,300+ properties qualified, the annual fiscal impact
could
be
approximately $436.4 million annually or $2.6 billion over six years.
Additionally, there will be more personnel expenditures for additional County
staff
in the
Department of Finance, but that cannot be estimated at this time.
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4.
An
actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
Not Applicable.
5.
An
estimate of expenditures related
to
County's information technology (IT) systems,
including Enterprise Resource Planning (ERP) systems.
Not Applicable.
6. Later actions that may affect future revenue and expenditures ifthe bill authorizes
future
spending.
.
Not Applicable.
7.
An
estimate of the stafftime needed to implement the bill.
Unknown at this time, but significant due to the number ofpotential properties eligible.
8.
An
explanation ofhow the addition ofnew staff responsibilities would affect other duties.
This bill cannot not be administered by current Finance staff. Additional staffwould be
required.
9.
An
estimate of costs when an additional appropriation is needed.
See #2 above.
10. A description of any variable that could affect revenue and cost estimates.
See #2 and #3 above.
11. Ranges ofrevenue or expenditures that are uncertain or difficult to project.
All revenue and expenditures are uncertain for this legislation.
12. If a bill is likely
to
have no fiscal impact, why that is the case.
Not Applicable.
13. Other fiscal impacts or comments.
None.
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14. The following contributed
to
and
concurred with this analysis:
Mike Coveyou, Finance
Jane Mukira, Office of Management and Budget
2ft?
/
[b
Date
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Economic Impact Statement
Bill 31-16, Taxation - Urban Agricultural Credit - Established
Background:
Bill 31-16 provides for a real property tax credit for "urban agricultural" property, defined as
properties that are not agriculturally zoned, that are between Y2 and 5 acres, that are used for
"urban agricultural purposes" and that are in Priority Funding Areas.
A property owner must conduct at least 2 urban agricultural purposes on the property. The
tenn of the credit would be 5 years. The credit would equal the property tax otherwise due on
the property.
1.
The sources of information, assumptions, and methodologies used.
Finance estimated for the fiscal impact of the bill that there are over 36,300 real property tax
accounts that are (1) taxable; (2) between Y2 and 5 acres; and (3) are not zoned as agricultural
properties using 2016 billing data from the County's property tax database. Most of these
properties are likely located in Priority Funding Areas, as most of the County's parcels are
located in Priority Funding Areas.
Since there are no data on how many of these properties are used for "urban agricultural
purposes" it is not possible to estimate with specificity the total potential loss of property
taxes to the County. The total amount of County taxes billed for these 36,300 plus accounts is
over $436.4 million dollars for FY17. Some portion of this amount of tax will be credited,
but it is not possible to reliably estimate how many properties will be eligible for the credit.
Finance estimates the average County-only tax for the 36,300 plus properties in question is
slightly more than $12,000 for FY17-the median tax is over $5,800 for FY17. For each 1%
of participation, based on the average tax, the credit would cost approximately $4.4 million.
As noted in the fiscal impact statement for the bill, since the proposed language is vague as to
what is defined as urban agricultural purpose, a very broad range of activities could qualify a
property for this credit. Therefore, the potential fiscal impact, according to the Fiscal Impact
Statement, is $436.4 million or the total tax revenue associated with these properties.
2. A description of any variable that could affect the economic impact estimates.
Urban agricultural land potentially benefits the County through eliminating blight and
improving access to healthy food. The primary variables that would affect the County's
economy positively would be potential increases in property values as neighborhoods are
improved. Given the limited scope of the bill from an acreage perspective, sites with large
assessed value will be excluded from the credit. Since the current language of the bill
includes such a broad range of activities that could qualify for the credit, the primary variable
in determining the economic impact of the bill is the number of properties that ultimately
qualify for the credit.
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Economic Impact Statement
Bill 31-16, Taxation - Urban Agricultural Credit - Established
3. The Bill's positive or negative effect, if any on employment, spending, savings,
investment, incomes, and property values in the County.
Given a lack of specificity of data regarding both current properties used for urban
agricultural purposes and those intended to be used in the future, it is difficult to accurately
quantify
with
any degree of precision the total economic impact to the County as a result of
this
bilI.
4.
If
a Bill is likely to have no economic impact, why is that the case?
This legislation
will
have an economic impact. See paragraph #3
5. The following contributed to or concurred with this analysis:
David Platt, Dennis
Hetman, and Robert Hagedoorn, Finance.
Alexandre
A.
Espinosa, Director
Department of Finance
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