GOITEM2
January 18, 2018
Worksession
MEMORANDUM
January 16, 2018
TO:
FROM:
SUBJECT:
Government Operations and Fiscal Policy Committee
Jeff Zyo~nior Legislative Analyst
Worksession:
Expedited Bill 36-17, Taxation - Development Impact Tax -
Exemptions - Amendments
Expedited Bill 36-17, Taxation - Development Impact Tax - Exemptions - Amendments,
sponsored by Lead Sponsor Councilmember Floreen, was introduced on October 31, 2017. The
primary goal of Bill 36-17 is to reduce the tax burden on projects that provide at least 25%
affordable housing. The Bill would allow a development that increases the number of dwelling
units previously approved to take advantage of the development tax exemption for projects with
25% affordable housing. As proposed, a development that provides 25% affordable units by
increasing the number of units in proposed development would qualify for the exemption.
A public hearing was held on December 5, 2017 at which a representative of the Sandy Spring
Friend's House spoke in favor of the amendment. The Friend's House recently received a special
exception amendment to increase the number of units on the_property. The speaker indicated the
fact that the number of units being increased distinguished it from other previously approved
projects in the pipeline. A second speaker also supported the Bill but requested an amendment to
exempt "some" previously approved development.
Background
There is a long legislative history on this topic. On December 6, 2011, Bill 39-11, Development
Impact Tax - Exemptions, was introduced to exempt market-rate rental dwelling units in any
development which included at least 25% affordable units from all impacts taxes. That Bill was
brought to the Council with a recommendation to enact with expanding amendments from the GO
Committee. There were signifiant concerns by the Council for the Bill's fiscal impact.
1
The Bill
was tabled and expired without enactment on December 1, 2014.
The "cost" of the provision was then calculated as $80,000
in
lost impact fees collected for each additional MPDU.
The 2015
0MB
study estimate the cost at $76,619 per additional affordable unit;
in
2013, staff estimated that same
cost to be $81,600
in
Metro Station Policy Areas and $111,520 outside of those areas where multifamily construction
is less likely.
1
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On February 3, 2015 Bill 8-15, Development Impact Tax - Exemptions, was introduced with
essentially the same purpose as Bill 39-11; however, the applicability section excluded some
21,000 dwelling units that had previously received approval. As enacted, the Bill was expanded
to include all for sale AND rental units within its scope but the exclusion of previously approved
projects was retained.
It
allowed projects with at least 25% affordable units that received a zoning
benefit (an exclusion in the Bill as introduced) to also eliminate impact taxes. In enacting Bill 8-
15, the Council rejected the idea of accomplishing the goal of increasing the number of affordable
units by a grant program instead of a "tax expenditure".
2
It
also rejected the idea of placing a cap
on the "lost" impact taxes.
When enacting Bill 8-15, the Council considered and rejected the idea to allow older projects in
the pipeline to get an impact tax exemptions for 25% affordable projects. The memorandum for
Council action included the following concerning the exclusion of pipeline projects:
Should pipeline projects be excluded?
Reducing the number of potential projects that may earn an exemption is a means of
reducing the fiscal impact of Bill 8-15. There are more than 21,000 multifamily units in
the pipeline.
3
Dropping those projects that have preliminary plan or site plan from the
proposed exemption evolved from the following narrative:
The intent of Bill 8-15 is to make the economics of affordable housing a little bit
better. The fee relief would never fully make-up for lower rents. Projects that have
paid for processing costs for preliminary plan or site plan approval do not need that
extra boost.
In 2013 staff estimated that in addition to the approved pipeline, there was zoning capacity
for 55,000 multi-family dwelling units. The new zoning code significantly increased that
potential by allowing commercial floor area to be used for residential purposes. There is a
large pool of potential beneficiaries of Bill 8..:15 even when projects with preliminary plan
or site plan approval are excluded.
The Committee recommended retaining Bill 8-15 's exclusion ofprojects in the development
pipeline from the proposed impact tax exemption.
[The Council agreed with the Committee
recommendation.]
Bill 36-17 would allow some previously approved projects to get relief from the imposition of
impact taxes.
It
would decrease the amount of money available for infrastructure necessary to
support the new development but would increase the supply of affordable housing.
2
"Tax expenditures" are subsidies delivered through the tax code as deductions, exclusions, and other tax
references. Tax expenditures reduce the amount of tax that households or corporations owe. To benefit from a tax
expenditure, a taxpayer must undertake certain actions or meet certain criteria.
3
21,439 units in mixed use projects - May 2015 Planning Staff Pipeline Report. Even though the development
pipeline has increased since then, only pre-2015 approved subdivisions may not get relief from impact taxes by
providing 25% affordable units.
2
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The amount and rate of growth in certain policy areas places significant demands on the County
for provision of major highways to support and accommodate that growth. The Council has
determined that imposing a
tax
that requires new development to pay its pro-rata share of the costs
of the improvements necessitated by that development in conjunction with other public funds is a
reasonable method of raising funds.
What was the estimated economic impact ofBill 8-15?
The Department of Finance estimate a tax loss of $48.6 as a worst case from Bill 8-15 as
introduced. The Department also assumed that the impact would start in FY19. The Council
approved Bill expanded the scope of the Bill from what was introduced.
What has happened since the enactment of Bill 8-15?
Since the enactment of Bill 8-15, one development was approved with 25% affordable units. The
project is called Bradford's Landing.
It
is located on Norbeck Road east of Georgia Avenue, across
from Leisure World. The project consists of 244 dwelling units (222 townhouses and 22 single
family detached units) including 61 MPDUs. In the absence ofBill 8-15, impact taxes would have
been $22,097 for single family market rate units and $18,080 for townhouse market rate units. The
tax expenditure for the 31 MPDUs that are not required by law is $7.8 million in fore gone impact
taxes (approximately $255,900 for each additional affordable unit).
The site plan application for a second project, Dowden's Station is scheduled for Planning Board
consideration in the very near future. This is a 105 unit development with (84 townhouses and 21
single-family detached units) with 27 MPDUs. The tax expenditure for the 14 affordable units
that are not required by law is $3.36 million in fore gone impact taxes (approximately $240,000
for each additional affordable unit).
According to DHCA, two projects are considering providing at least 25% MPDUs. (As new
approval, these projects would be unaffected by Bill 36-17.) The total tax expenditure for these
projects would be $26.8 million for the benefit of 190 additional affordable units (approximately
$141,000 for each additional affordable unit).
The total currently anticipated tax expenditure from Bill 8-15 is $37.9 million for 235 additional
MPDUs (approximately $161,300 for each additional affordable unit).
What is the known effect of Bill 36-17?
One project with an older subdivision approval was allowed more dwelling units under an
amendment to their special exception. This is a senior housing project with 236 market rate
dwelling units and 76 affordable units. The underlying special exception was amended to include
these new units. Bill 36-17 would exempt this project from impact taxes. Under Bill 36-17 a little
over $1.5 million would be forgiven in transportation impact taxes (approximately $39,500 for
each additional affordable unit).
4
There is no school impact tax for senior housing. The Transportation is $4,017 per unit. A market rate non-age
restricted low rise dwelling would be $33,996 per unit ($14,059 transportation and $19,937 school).
4
3
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As introduced, the exemption allowed by Bill 36-17 is very narrow in scope. There are very few
previously approved subdivisions that could increase the allowed number of dwelling units without
exceeding the density allowed by zoning.
What reduction in impact tax is anticipated by the approval of Bill 36-17?
The Department of Finance estimated that the enactment of Bill 36-17 would reduce expected
impact tax receipts by approximately $12.4 million over the next 3 fiscal years ($4.1 million per
year).
The Council has been collecting about $60 million per year in impact taxes. A reduction of $4.1
million per year would reduce those revenues by 6.8%.
The estimated impact of Bill 36-17 is very high, in staffs opinion. The exemption in Bill 36-17
only applies to the increase in the number of units from the prior approval, not the entire project.
The Department of Finance estimated that 400 single-family units (those with the highest impact
taxes) would take advantage of Bill 36-17. Single-family developments are very likely to be at
their maximum density and would lack the ability to expand. The use of Bill 36-17 by multi-
family units or senior housing projects would reduce the tax expenditure.
What revision was proposed by testimony?
One developer representative requested an expansion ofBill 36-17 to allow some (up to 500 units
per year) of previously approved projects (before 2008) to take advantage of the exemption for
providing at least 25% affordable units. Specifically, the additional exemption would be as
follows:
If
the relevant preliminary subdivision plan was approved before January 1, 2008,
Sections 52--41(g)(5) and 52-54(c) apply to building permit applications, up to a
maximum of 500 dwelling units in any 12 month period, for the unbuilt portion of the
development.
What would the effect be of expanding Bill 3 6-17 to allow up to 5 00 units per year to revise their
older plans and being exempt.from impact taxes by providing more affordable units?
One project (at Century Boulevard and Cloverleaf Center Drive in Germantown) is considering
amending a prior approval to provide 25% MPDUs. This is a 488 unit project (303 low rise and
174 townhouses currently with 61 MPDUs. The MPDUs would double to a total of 122 MPDUs
at a tax expenditure of$12.4 million (approximately $203,300 for each additional affordable unit).
5
5
The· exemption under the proposed amendment would apply to all market rate units in the project. The new
exemption proposed in Bill 36-17 as introduced only applies to the increase number of dwelling units from the original
approval.
4
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The Department of Finance has not given a fiscal impact of the expansion proposed by testimony.
Staff can ask that question at the Committee's request. There are 2 limiting factors in the proposed
amendment: 1) it only applies to the pre-2008 portion of the development pipeline (about 2,000
units of the 20,000 units currently excluded from the exemption provision) and; 2) there is a
maximum number of units that could take advantage of the provision in any given year (500). The
maximum allowed exemption could reduce impact tax revenue by about $12.5 million per year for
4 years, if every project with the potential to take advantage of this provision did so.
6
The Council has been collecting about $60 million per year in impact taxes. A reduction of $12.5
million per year would reduce those revenues by $20.8%.
This packet contains:
Expedited Bill 36-17
Legislative Request Report
Fiscal and Economic Impact statement
September 2017 Development Pipeline
Circle#
1
3
4
9
F:\LA W\BJLLS\1736 Development Impact Tax-Exemptions-Applicability\GO Memo.Docx
6
The reduced impact
tax
revenue would depend upon the location of the project and the dwelling unit type.
5
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36-17
Expedited Bill No.
Concerning: Taxation - Development
Exemptions
Impact Tax
Amendments
Revised: October
31, 2017
Draft No. 5_
October
31, 2017
Introduced:
May
1, 2019
Expires:
[date]
Enacted:
[date signed]
Executive:
[date takes effect]
Effective:
Sunset Date: __:._eN=on""'e'-- ------
[year]
Ch. Jttl_, Laws of Mont. Co.
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Floreen
AN EXPEDITED ACT
to:
amend the applicability provision of certain development impact taxes; and
(1)
generally amend the law governing development impact taxes.
(2)
By amending
2015 Laws of Montgomery County, Chapter 37
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.
36-17
1
Sec.
1.
Section 2 of Chapter 37 of the 2015 Laws of Montgomery County
is amended as follows:
Sec. 2. Applicability.
.{ru
Except as provided in paragraph
ili1
County Code Section 52-41(g)(5),
formerly 52-49(g)(5).,_ and Section 52-54(c)(5), formerly 52-89(c)(5),
both inserted by Section 1 of this Act, do not apply to any development
which received preliminary subdivision plan approval or site plan
approval (or a similar approval in a municipality) before this Act took
effect.
2
3
4
5
6
7
8
9
1O
11
(hl
If an approved development is amended to include additional dwelling
units and at least 25% of the additional dwelling units are exempt under
paragraph
Q1@.Q1
or
ill
of Section 52-54(c), or any combination of
them, then Section 52-41(g)(5) and Section 52-54(c)(5), @Ply to the
additional units.
12
13
14
15
16
17
18
Sec. 2.
Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date on which it becomes
law.
Approved:
19
20
Roger Berliner, President, County Council
Date
21
Approved:
22
Isiah Leggett, County Executive
Date
f:\law\bills\ 1736 development impact tax-exemptions-applicability\b&oocx
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LEGISLATIVE REQUEST REPORT
Expedited Bill 36-17
Taxation
-
Development Impact Tax
-
Exemptions Applicability
Expedited Bill 36-17 would reduce the tax burden on previously
approved projects that provide additional dwelling units with at least
25% affordable housing in the addition. The reduced tax burden would
only apply to the additional units.
The current applicability provision for an impact tax exemption in
current law does not allow a development that increases the number of
dwelling units previously approved to take advantage of the
development tax exemption for projects with 25% affordable housing.
The primary goal of Bill 36-17 is to encourage the provision of
affordable housing units beyond the percentage required by law. The
objective is to reduce impact taxes on projects providing a significant
percentage of affordable dwelling units.
County Attorney' s Office
To be requested.
To be requested.
To be requested.
To be researched.
Jeff Zyontz, Senior Legislative Analyst, 240-777-7896
To be researched.
DESCRIPTION:
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENAL TIES:
None.
f:\law\bills\1736 development impact tax-exemptions-applicability\lrr.docx
0
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ROCKVILLE, MARYLAND
MEM ORA NDU M
December 4, 2017
,.,/ ,
.
TO:
FROM:
Roger Berliner, President, County Council
~
f..1
'f'b"-
SUBJECT:
Jennifer
A.
Hughes, Director, Office of Management and Budget ,
Alexandre
A.
Espinosa, Director, Department of Finance
.
;z.~
/--4
r,L~_
-
FEIS for Expedited Bill 36-17, Taxation - Development Impa ct Tax
Exemptions - Amendments
above-
Please find attached the fiscal and economic impact statements for the
referenced legislation.
JAH: fz
cc: Bonnie Kirkland, Assistant Chie f Administrative Officer
Lisa Austin, Offices of the County Executive
Joy
Nurm i, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
David Platt, Departmeiit of Finance
Dennis Hetman, Department of Finance
Jennifer Nordin, Office of Management and Budget
Felicia Zhang, Offic e of Management and Budget
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Fiscal Impact Statement
BILL36-17
Taxation
-
Development Impact Tax
-
Exemptions
-
Amendments
1. Bill Summary
Bill 36-17 reduces the impact tax burden on previously approved development projects
that provide additional affordable dwelling units and meet the 25% affordable housing
requirement through the additional units. The reduced tax burden applies only to the
additional units.
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 Department of Finance estimates a reduction in impact tax revenues by $12.4 million
over a three-year period (FY19-FY21) (See Economic Impact Statement).
There are no estimated expenditures.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
FY18
Impact Tax
Revenues
$0
FY19
-$4,133,000
$0
FY20
-$4,133,000
FY21
-$4,133,000
FY22
TBD*
$0
FY23
TBD*
$0
Expenditures $0
$0
$0
*Department of Finance estimates are not available for FY22-23.
4. An actuarial analysis through the entire amortization period for each bill/regulation that
would affect retiree pension or group insurance costs.
Not applicable.
5. Later actions that may affect future revenue and expenditures if the bill/regulation
authorizes future spending.
Not applicable.
6.
An
estimate of the staff time needed to implement the bill/regulation.
Not applicable.
7. An explanation of how the addition of new staff responsibilities would affect other duties.
Not applicable.
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8. An estimate of costs when an additional appropriation is needed.
Not applicable.
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:
See
#2_.
12.
Other fiscal impacts or comments.
Not applicable.
13. The following contributed to and concurred with this analysis:
Barb Suter, DPS
Tim Goetzinger, DHCA
Jennifer Nordin,
0MB
es, Director
e of Management and Budget
Ll/4/11
Date
1
1
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Economic Impact Statement
Bill 36-17 Taxation
-
Development Impact Tax
-
Exemptions
-
Amendments
Background:
Expedited Bill 36-17 would reduce the tax burden on previously· approved projects that
provide additional dwelling units with at least 25% affordable housing in the addition. The
reduced tax burden would only apply to the additional units. The current applicability provision
for an impact tax exemption in current law does not allow a development that increases the
number of dwelling units previously approved to take advantage of the development tax
exemption for projects with 25% affordable housing. The primary goal of Bill 36-17 is to
encourage the provision of affordable housing units beyond the percentage required by law. The
objective is to reduce impact taxes on projects providing a significant percentage of affordable
dwelling
units.
1.
The
sources of information, assumptions, and methodologies used.
. • Department of Finance, School and Transportation Impact Tax forecasting model
• Department of Housing and Community Affairs
• Montgomery County Park and Planning Rental Housing Study with
RKG
Associates
Inc., August 2016
2. A description of any variable that could affect the economic impact estimates.
The
primary
variable affecting economic impact estimates is amendments for approved
developments that are adding units. The bill would not apply to developments in which the
total number of units is unchanged, but instead the Bill requires that the percentage of
moderately priced dwelling units (MPDUs) is increased from the regular requirement (12.5%
to 15%) to 25%. According to the Department of Housing and Community Affairs (DHCA),
the types of developments most likely to seek the exemption would be single-family
detached or single-family attached developments in yellow or green policy areas, because
these types of units have the highest impact taxes. The impact tax requirement for a market~
rate unit in such a development would be around $45,000. Because many large
developments
in
these areas
including
Clarksburg
Town
Center, Clarksburg
Village, and
Cabin Branch have already been approved over the past several years and are partly or
mostly built out, the expectation is that the additional units qualifying for the impact
tax
exemption under this bill will be limited.
·
Using current data provided by DHCA, 400 additional units are likely to be added in total
over a three.year time horizon. Yellow and green policy areas have less density than the
orange and red areas however they are larger geographically and are expected to have a
greater incentive
to
take advantage of the proposed exemptions given their higher impact
rates.
An
average combined school and transportation impact tax across the four main
dwelling types likely to be affected (including single-family detached, single-family attached,
multifamily low rise, and multifamily high rise) is approximately $31,000 per unit.
tax
Page I of2
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Economic Impact Statement
Bill 36-
17
Taxation
-
Development Impact Tax
-
Exemptions
-
Amendments
3.
The Bill's positive or negative effect,
if
any on employment, spending, savings,
investment, incomes, and property values in the County.
By qualifying for the bill's proposed exemption, the estimated 400 additional units would
reduce revenues to the County by roughly
$12.4
million in combined school
and
transportation impact taxes over the three-year time horizon. The estimated reduction
in
impact taxes would directly impact spending for Montgomery County Public Schools and
capital improvement infrastructure projects as they equally divide a
50
percent share of the
total annual impact
tax
collections.
A
recent study completed by the State of New York
1
indicates that the primary economic
benefit of additional affordable housing occurs during the construction period of the
properties. During this phase, affordable housing development produces direct job
opportunities for construction workers and spinoff jobs from indirect and induced spending,
stimulating the local and regional economies. Upon completion, affordable housing projects
help stabilize distressed neighborhoods, drive local retail spending, and support permanent
jobs to service residents and operate and maintain the housing developments. Given the
legislation only applies to ctment inventory of previously approved projects, there
is
minimal
expectation for additional construction
as a
result.
· The primary positive economic effects that additional affordable housing could have on
employment, spending, savings, investment, incomes, or pr9perty values
are
expected to be
minimal as the bill is not designed to encourage supplementary infrastructure construction.
The County would need to
find
additional sources of revenue or cut expenditures to match
dollar-for-dollar the estimated
$12.4
million-dollar reduction in impact
tax
revenues for
schools and capital improvement projects likely to result from
this
bill
over
a
three-year
time
horizon.
·
4.
If
a Bill is likely
to
have no economic impact,
why
is that the case?
See number 3.
S,
The following contributed
to
or concurred with this analysis:
David Platt, Dennis Hetman,
and
Robert Hagedoorn, Finance.
~Ifate
1 New York State Association for Affordable
Housing, "Economic Impacts of Affordable Housing on New York
State's Economy" HR&A Advisors, Inc. February IO, 2017
Page 2 of2
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SeQtember 2017 PiQeline*
#
of Plans
1985
to
1989
1990 to 1994
1995
to 1999
2000 to 2004
2005
to 2009
2010 to 2014
2015 to present
Total
3
1
21
32
127
106
113
Residential
Unbuilt
DUs
1
0
123
109
895
908
1839
Mixed
Unbuilt
DUs
0
0
601
0
555
8426
12458
NonResidental
Unbuilt
GFA
260201
157052
685359
355000
1915165
4215960
1170562
Mixed
Unbuilt
GFA
0
0
916955
1
589877
4492813
3740750
9740396
8759299
22040
3875
403
Mixed developments contain
residential
DUs and
non-residential
GFA
Residential (dus)
16K
14K
Mixed
Projects
DUs
Residential
Only
DUs
12K
·c
:J
O>
.El
1OK
8K
6K
ai
::
0
9,334
4K
2K
OK
1985 to 1989
1990 to 1994
1995 to 1999
2000to2004
2005 to 2009
2010 to 2014
2015 to present
-1
1
0
0
724
123
109
109
Year Approved
Non-Residential (sq.ft.)
1OM
Mixed
Projects
GFA
8M
(ll
-
Non-Residential Only
GFA
~
0
~
6M
0
u:
(!)
e
II)
4M
2M
0
260,201
1985 to 1989
0
157,052
1990
to 1994
1995 to 1999
2000to2004
2005 to 2009
2010 to 2014
2015 to
present
OM
Year Approved
*
does not include Laytonsville, Poolesville, Rockville or Gaithersburg Pipeline data
Source: Montgomery County Planning, Information Technology and Innovation Division
(j)
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GOITEM2
January 18, 2018
Worksession
MEMORANDUM
January 16, 2018
TO:
FROM:
SUBJECT:
Government Operations and Fiscal Policy Committee
Jeff Zyo~nior Legislative Analyst
Worksession:
Expedited Bill 36-17, Taxation - Development Impact Tax -
Exemptions - Amendments
Expedited Bill 36-17, Taxation - Development Impact Tax - Exemptions - Amendments,
sponsored by Lead Sponsor Councilmember Floreen, was introduced on October 31, 2017. The
primary goal of Bill 36-17 is to reduce the tax burden on projects that provide at least 25%
affordable housing. The Bill would allow a development that increases the number of dwelling
units previously approved to take advantage of the development tax exemption for projects with
25% affordable housing. As proposed, a development that provides 25% affordable units by
increasing the number of units in proposed development would qualify for the exemption.
A public hearing was held on December 5, 2017 at which a representative of the Sandy Spring
Friend's House spoke in favor of the amendment. The Friend's House recently received a special
exception amendment to increase the number of units on the_property. The speaker indicated the
fact that the number of units being increased distinguished it from other previously approved
projects in the pipeline. A second speaker also supported the Bill but requested an amendment to
exempt "some" previously approved development.
Background
There is a long legislative history on this topic. On December 6, 2011, Bill 39-11, Development
Impact Tax - Exemptions, was introduced to exempt market-rate rental dwelling units in any
development which included at least 25% affordable units from all impacts taxes. That Bill was
brought to the Council with a recommendation to enact with expanding amendments from the GO
Committee. There were signifiant concerns by the Council for the Bill's fiscal impact.
1
The Bill
was tabled and expired without enactment on December 1, 2014.
The "cost" of the provision was then calculated as $80,000
in
lost impact fees collected for each additional MPDU.
The 2015
0MB
study estimate the cost at $76,619 per additional affordable unit;
in
2013, staff estimated that same
cost to be $81,600
in
Metro Station Policy Areas and $111,520 outside of those areas where multifamily construction
is less likely.
1
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On February 3, 2015 Bill 8-15, Development Impact Tax - Exemptions, was introduced with
essentially the same purpose as Bill 39-11; however, the applicability section excluded some
21,000 dwelling units that had previously received approval. As enacted, the Bill was expanded
to include all for sale AND rental units within its scope but the exclusion of previously approved
projects was retained.
It
allowed projects with at least 25% affordable units that received a zoning
benefit (an exclusion in the Bill as introduced) to also eliminate impact taxes. In enacting Bill 8-
15, the Council rejected the idea of accomplishing the goal of increasing the number of affordable
units by a grant program instead of a "tax expenditure".
2
It
also rejected the idea of placing a cap
on the "lost" impact taxes.
When enacting Bill 8-15, the Council considered and rejected the idea to allow older projects in
the pipeline to get an impact tax exemptions for 25% affordable projects. The memorandum for
Council action included the following concerning the exclusion of pipeline projects:
Should pipeline projects be excluded?
Reducing the number of potential projects that may earn an exemption is a means of
reducing the fiscal impact of Bill 8-15. There are more than 21,000 multifamily units in
the pipeline.
3
Dropping those projects that have preliminary plan or site plan from the
proposed exemption evolved from the following narrative:
The intent of Bill 8-15 is to make the economics of affordable housing a little bit
better. The fee relief would never fully make-up for lower rents. Projects that have
paid for processing costs for preliminary plan or site plan approval do not need that
extra boost.
In 2013 staff estimated that in addition to the approved pipeline, there was zoning capacity
for 55,000 multi-family dwelling units. The new zoning code significantly increased that
potential by allowing commercial floor area to be used for residential purposes. There is a
large pool of potential beneficiaries of Bill 8..:15 even when projects with preliminary plan
or site plan approval are excluded.
The Committee recommended retaining Bill 8-15 's exclusion ofprojects in the development
pipeline from the proposed impact tax exemption.
[The Council agreed with the Committee
recommendation.]
Bill 36-17 would allow some previously approved projects to get relief from the imposition of
impact taxes.
It
would decrease the amount of money available for infrastructure necessary to
support the new development but would increase the supply of affordable housing.
2
"Tax expenditures" are subsidies delivered through the tax code as deductions, exclusions, and other tax
references. Tax expenditures reduce the amount of tax that households or corporations owe. To benefit from a tax
expenditure, a taxpayer must undertake certain actions or meet certain criteria.
3
21,439 units in mixed use projects - May 2015 Planning Staff Pipeline Report. Even though the development
pipeline has increased since then, only pre-2015 approved subdivisions may not get relief from impact taxes by
providing 25% affordable units.
2
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The amount and rate of growth in certain policy areas places significant demands on the County
for provision of major highways to support and accommodate that growth. The Council has
determined that imposing a
tax
that requires new development to pay its pro-rata share of the costs
of the improvements necessitated by that development in conjunction with other public funds is a
reasonable method of raising funds.
What was the estimated economic impact ofBill 8-15?
The Department of Finance estimate a tax loss of $48.6 as a worst case from Bill 8-15 as
introduced. The Department also assumed that the impact would start in FY19. The Council
approved Bill expanded the scope of the Bill from what was introduced.
What has happened since the enactment of Bill 8-15?
Since the enactment of Bill 8-15, one development was approved with 25% affordable units. The
project is called Bradford's Landing.
It
is located on Norbeck Road east of Georgia Avenue, across
from Leisure World. The project consists of 244 dwelling units (222 townhouses and 22 single
family detached units) including 61 MPDUs. In the absence ofBill 8-15, impact taxes would have
been $22,097 for single family market rate units and $18,080 for townhouse market rate units. The
tax expenditure for the 31 MPDUs that are not required by law is $7.8 million in fore gone impact
taxes (approximately $255,900 for each additional affordable unit).
The site plan application for a second project, Dowden's Station is scheduled for Planning Board
consideration in the very near future. This is a 105 unit development with (84 townhouses and 21
single-family detached units) with 27 MPDUs. The tax expenditure for the 14 affordable units
that are not required by law is $3.36 million in fore gone impact taxes (approximately $240,000
for each additional affordable unit).
According to DHCA, two projects are considering providing at least 25% MPDUs. (As new
approval, these projects would be unaffected by Bill 36-17.) The total tax expenditure for these
projects would be $26.8 million for the benefit of 190 additional affordable units (approximately
$141,000 for each additional affordable unit).
The total currently anticipated tax expenditure from Bill 8-15 is $37.9 million for 235 additional
MPDUs (approximately $161,300 for each additional affordable unit).
What is the known effect of Bill 36-17?
One project with an older subdivision approval was allowed more dwelling units under an
amendment to their special exception. This is a senior housing project with 236 market rate
dwelling units and 76 affordable units. The underlying special exception was amended to include
these new units. Bill 36-17 would exempt this project from impact taxes. Under Bill 36-17 a little
over $1.5 million would be forgiven in transportation impact taxes (approximately $39,500 for
each additional affordable unit).
4
There is no school impact tax for senior housing. The Transportation is $4,017 per unit. A market rate non-age
restricted low rise dwelling would be $33,996 per unit ($14,059 transportation and $19,937 school).
4
3
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As introduced, the exemption allowed by Bill 36-17 is very narrow in scope. There are very few
previously approved subdivisions that could increase the allowed number of dwelling units without
exceeding the density allowed by zoning.
What reduction in impact tax is anticipated by the approval of Bill 36-17?
The Department of Finance estimated that the enactment of Bill 36-17 would reduce expected
impact tax receipts by approximately $12.4 million over the next 3 fiscal years ($4.1 million per
year).
The Council has been collecting about $60 million per year in impact taxes. A reduction of $4.1
million per year would reduce those revenues by 6.8%.
The estimated impact of Bill 36-17 is very high, in staffs opinion. The exemption in Bill 36-17
only applies to the increase in the number of units from the prior approval, not the entire project.
The Department of Finance estimated that 400 single-family units (those with the highest impact
taxes) would take advantage of Bill 36-17. Single-family developments are very likely to be at
their maximum density and would lack the ability to expand. The use of Bill 36-17 by multi-
family units or senior housing projects would reduce the tax expenditure.
What revision was proposed by testimony?
One developer representative requested an expansion ofBill 36-17 to allow some (up to 500 units
per year) of previously approved projects (before 2008) to take advantage of the exemption for
providing at least 25% affordable units. Specifically, the additional exemption would be as
follows:
If
the relevant preliminary subdivision plan was approved before January 1, 2008,
Sections 52--41(g)(5) and 52-54(c) apply to building permit applications, up to a
maximum of 500 dwelling units in any 12 month period, for the unbuilt portion of the
development.
What would the effect be of expanding Bill 3 6-17 to allow up to 5 00 units per year to revise their
older plans and being exempt.from impact taxes by providing more affordable units?
One project (at Century Boulevard and Cloverleaf Center Drive in Germantown) is considering
amending a prior approval to provide 25% MPDUs. This is a 488 unit project (303 low rise and
174 townhouses currently with 61 MPDUs. The MPDUs would double to a total of 122 MPDUs
at a tax expenditure of$12.4 million (approximately $203,300 for each additional affordable unit).
5
5
The· exemption under the proposed amendment would apply to all market rate units in the project. The new
exemption proposed in Bill 36-17 as introduced only applies to the increase number of dwelling units from the original
approval.
4
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The Department of Finance has not given a fiscal impact of the expansion proposed by testimony.
Staff can ask that question at the Committee's request. There are 2 limiting factors in the proposed
amendment: 1) it only applies to the pre-2008 portion of the development pipeline (about 2,000
units of the 20,000 units currently excluded from the exemption provision) and; 2) there is a
maximum number of units that could take advantage of the provision in any given year (500). The
maximum allowed exemption could reduce impact tax revenue by about $12.5 million per year for
4 years, if every project with the potential to take advantage of this provision did so.
6
The Council has been collecting about $60 million per year in impact taxes. A reduction of $12.5
million per year would reduce those revenues by $20.8%.
This packet contains:
Expedited Bill 36-17
Legislative Request Report
Fiscal and Economic Impact statement
September 2017 Development Pipeline
Circle#
1
3
4
9
F:\LA W\BJLLS\1736 Development Impact Tax-Exemptions-Applicability\GO Memo.Docx
6
The reduced impact
tax
revenue would depend upon the location of the project and the dwelling unit type.
5
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36-17
Expedited Bill No.
Concerning: Taxation - Development
Exemptions
Impact Tax
Amendments
Revised: October
31, 2017
Draft No. 5_
October
31, 2017
Introduced:
May
1, 2019
Expires:
[date]
Enacted:
[date signed]
Executive:
[date takes effect]
Effective:
Sunset Date: __:._eN=on""'e'-- ------
[year]
Ch. Jttl_, Laws of Mont. Co.
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Floreen
AN EXPEDITED ACT
to:
amend the applicability provision of certain development impact taxes; and
(1)
generally amend the law governing development impact taxes.
(2)
By amending
2015 Laws of Montgomery County, Chapter 37
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.
36-17
1
Sec.
1.
Section 2 of Chapter 37 of the 2015 Laws of Montgomery County
is amended as follows:
Sec. 2. Applicability.
.{ru
Except as provided in paragraph
ili1
County Code Section 52-41(g)(5),
formerly 52-49(g)(5).,_ and Section 52-54(c)(5), formerly 52-89(c)(5),
both inserted by Section 1 of this Act, do not apply to any development
which received preliminary subdivision plan approval or site plan
approval (or a similar approval in a municipality) before this Act took
effect.
2
3
4
5
6
7
8
9
1O
11
(hl
If an approved development is amended to include additional dwelling
units and at least 25% of the additional dwelling units are exempt under
paragraph
Q1@.Q1
or
ill
of Section 52-54(c), or any combination of
them, then Section 52-41(g)(5) and Section 52-54(c)(5), @Ply to the
additional units.
12
13
14
15
16
17
18
Sec. 2.
Expedited Effective Date.
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date on which it becomes
law.
Approved:
19
20
Roger Berliner, President, County Council
Date
21
Approved:
22
Isiah Leggett, County Executive
Date
f:\law\bills\ 1736 development impact tax-exemptions-applicability\b&oocx
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LEGISLATIVE REQUEST REPORT
Expedited Bill 36-17
Taxation
-
Development Impact Tax
-
Exemptions Applicability
Expedited Bill 36-17 would reduce the tax burden on previously
approved projects that provide additional dwelling units with at least
25% affordable housing in the addition. The reduced tax burden would
only apply to the additional units.
The current applicability provision for an impact tax exemption in
current law does not allow a development that increases the number of
dwelling units previously approved to take advantage of the
development tax exemption for projects with 25% affordable housing.
The primary goal of Bill 36-17 is to encourage the provision of
affordable housing units beyond the percentage required by law. The
objective is to reduce impact taxes on projects providing a significant
percentage of affordable dwelling units.
County Attorney' s Office
To be requested.
To be requested.
To be requested.
To be researched.
Jeff Zyontz, Senior Legislative Analyst, 240-777-7896
To be researched.
DESCRIPTION:
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENAL TIES:
None.
f:\law\bills\1736 development impact tax-exemptions-applicability\lrr.docx
0
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ROCKVILLE, MARYLAND
MEM ORA NDU M
December 4, 2017
,.,/ ,
.
TO:
FROM:
Roger Berliner, President, County Council
~
f..1
'f'b"-
SUBJECT:
Jennifer
A.
Hughes, Director, Office of Management and Budget ,
Alexandre
A.
Espinosa, Director, Department of Finance
.
;z.~
/--4
r,L~_
-
FEIS for Expedited Bill 36-17, Taxation - Development Impa ct Tax
Exemptions - Amendments
above-
Please find attached the fiscal and economic impact statements for the
referenced legislation.
JAH: fz
cc: Bonnie Kirkland, Assistant Chie f Administrative Officer
Lisa Austin, Offices of the County Executive
Joy
Nurm i, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
David Platt, Departmeiit of Finance
Dennis Hetman, Department of Finance
Jennifer Nordin, Office of Management and Budget
Felicia Zhang, Offic e of Management and Budget
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Fiscal Impact Statement
BILL36-17
Taxation
-
Development Impact Tax
-
Exemptions
-
Amendments
1. Bill Summary
Bill 36-17 reduces the impact tax burden on previously approved development projects
that provide additional affordable dwelling units and meet the 25% affordable housing
requirement through the additional units. The reduced tax burden applies only to the
additional units.
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 Department of Finance estimates a reduction in impact tax revenues by $12.4 million
over a three-year period (FY19-FY21) (See Economic Impact Statement).
There are no estimated expenditures.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
FY18
Impact Tax
Revenues
$0
FY19
-$4,133,000
$0
FY20
-$4,133,000
FY21
-$4,133,000
FY22
TBD*
$0
FY23
TBD*
$0
Expenditures $0
$0
$0
*Department of Finance estimates are not available for FY22-23.
4. An actuarial analysis through the entire amortization period for each bill/regulation that
would affect retiree pension or group insurance costs.
Not applicable.
5. Later actions that may affect future revenue and expenditures if the bill/regulation
authorizes future spending.
Not applicable.
6.
An
estimate of the staff time needed to implement the bill/regulation.
Not applicable.
7. An explanation of how the addition of new staff responsibilities would affect other duties.
Not applicable.
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8. An estimate of costs when an additional appropriation is needed.
Not applicable.
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:
See
#2_.
12.
Other fiscal impacts or comments.
Not applicable.
13. The following contributed to and concurred with this analysis:
Barb Suter, DPS
Tim Goetzinger, DHCA
Jennifer Nordin,
0MB
es, Director
e of Management and Budget
Ll/4/11
Date
1
1
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Economic Impact Statement
Bill 36-17 Taxation
-
Development Impact Tax
-
Exemptions
-
Amendments
Background:
Expedited Bill 36-17 would reduce the tax burden on previously· approved projects that
provide additional dwelling units with at least 25% affordable housing in the addition. The
reduced tax burden would only apply to the additional units. The current applicability provision
for an impact tax exemption in current law does not allow a development that increases the
number of dwelling units previously approved to take advantage of the development tax
exemption for projects with 25% affordable housing. The primary goal of Bill 36-17 is to
encourage the provision of affordable housing units beyond the percentage required by law. The
objective is to reduce impact taxes on projects providing a significant percentage of affordable
dwelling
units.
1.
The
sources of information, assumptions, and methodologies used.
. • Department of Finance, School and Transportation Impact Tax forecasting model
• Department of Housing and Community Affairs
• Montgomery County Park and Planning Rental Housing Study with
RKG
Associates
Inc., August 2016
2. A description of any variable that could affect the economic impact estimates.
The
primary
variable affecting economic impact estimates is amendments for approved
developments that are adding units. The bill would not apply to developments in which the
total number of units is unchanged, but instead the Bill requires that the percentage of
moderately priced dwelling units (MPDUs) is increased from the regular requirement (12.5%
to 15%) to 25%. According to the Department of Housing and Community Affairs (DHCA),
the types of developments most likely to seek the exemption would be single-family
detached or single-family attached developments in yellow or green policy areas, because
these types of units have the highest impact taxes. The impact tax requirement for a market~
rate unit in such a development would be around $45,000. Because many large
developments
in
these areas
including
Clarksburg
Town
Center, Clarksburg
Village, and
Cabin Branch have already been approved over the past several years and are partly or
mostly built out, the expectation is that the additional units qualifying for the impact
tax
exemption under this bill will be limited.
·
Using current data provided by DHCA, 400 additional units are likely to be added in total
over a three.year time horizon. Yellow and green policy areas have less density than the
orange and red areas however they are larger geographically and are expected to have a
greater incentive
to
take advantage of the proposed exemptions given their higher impact
rates.
An
average combined school and transportation impact tax across the four main
dwelling types likely to be affected (including single-family detached, single-family attached,
multifamily low rise, and multifamily high rise) is approximately $31,000 per unit.
tax
Page I of2
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Economic Impact Statement
Bill 36-
17
Taxation
-
Development Impact Tax
-
Exemptions
-
Amendments
3.
The Bill's positive or negative effect,
if
any on employment, spending, savings,
investment, incomes, and property values in the County.
By qualifying for the bill's proposed exemption, the estimated 400 additional units would
reduce revenues to the County by roughly
$12.4
million in combined school
and
transportation impact taxes over the three-year time horizon. The estimated reduction
in
impact taxes would directly impact spending for Montgomery County Public Schools and
capital improvement infrastructure projects as they equally divide a
50
percent share of the
total annual impact
tax
collections.
A
recent study completed by the State of New York
1
indicates that the primary economic
benefit of additional affordable housing occurs during the construction period of the
properties. During this phase, affordable housing development produces direct job
opportunities for construction workers and spinoff jobs from indirect and induced spending,
stimulating the local and regional economies. Upon completion, affordable housing projects
help stabilize distressed neighborhoods, drive local retail spending, and support permanent
jobs to service residents and operate and maintain the housing developments. Given the
legislation only applies to ctment inventory of previously approved projects, there
is
minimal
expectation for additional construction
as a
result.
· The primary positive economic effects that additional affordable housing could have on
employment, spending, savings, investment, incomes, or pr9perty values
are
expected to be
minimal as the bill is not designed to encourage supplementary infrastructure construction.
The County would need to
find
additional sources of revenue or cut expenditures to match
dollar-for-dollar the estimated
$12.4
million-dollar reduction in impact
tax
revenues for
schools and capital improvement projects likely to result from
this
bill
over
a
three-year
time
horizon.
·
4.
If
a Bill is likely
to
have no economic impact,
why
is that the case?
See number 3.
S,
The following contributed
to
or concurred with this analysis:
David Platt, Dennis Hetman,
and
Robert Hagedoorn, Finance.
~Ifate
1 New York State Association for Affordable
Housing, "Economic Impacts of Affordable Housing on New York
State's Economy" HR&A Advisors, Inc. February IO, 2017
Page 2 of2
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SeQtember 2017 PiQeline*
#
of Plans
1985
to
1989
1990 to 1994
1995
to 1999
2000 to 2004
2005
to 2009
2010 to 2014
2015 to present
Total
3
1
21
32
127
106
113
Residential
Unbuilt
DUs
1
0
123
109
895
908
1839
Mixed
Unbuilt
DUs
0
0
601
0
555
8426
12458
NonResidental
Unbuilt
GFA
260201
157052
685359
355000
1915165
4215960
1170562
Mixed
Unbuilt
GFA
0
0
916955
1
589877
4492813
3740750
9740396
8759299
22040
3875
403
Mixed developments contain
residential
DUs and
non-residential
GFA
Residential (dus)
16K
14K
Mixed
Projects
DUs
Residential
Only
DUs
12K
·c
:J
O>
.El
1OK
8K
6K
ai
::
0
9,334
4K
2K
OK
1985 to 1989
1990 to 1994
1995 to 1999
2000to2004
2005 to 2009
2010 to 2014
2015 to present
-1
1
0
0
724
123
109
109
Year Approved
Non-Residential (sq.ft.)
1OM
Mixed
Projects
GFA
8M
(ll
-
Non-Residential Only
GFA
~
0
~
6M
0
u:
(!)
e
II)
4M
2M
0
260,201
1985 to 1989
0
157,052
1990
to 1994
1995 to 1999
2000to2004
2005 to 2009
2010 to 2014
2015 to
present
OM
Year Approved
*
does not include Laytonsville, Poolesville, Rockville or Gaithersburg Pipeline data
Source: Montgomery County Planning, Information Technology and Innovation Division
(j)