New fees imposed on homebuilders and other developers in Baltimore County to help cover the cost of schools and roads kick in next year. But after a raft of last-minute changes by the County Council, officials don’t expect to see revenue from them for several years.
The council’s changes added delays and exempted many areas of the county, so officials don’t even know exactly how much money the system will generate.
Such “impact fees” aim to help cover the public costs of development and are common elsewhere in the Baltimore region. The concept didn’t gain traction in Baltimore County until this year, when both County Executive Johnny Olszewski Jr. and Councilman David Marks introduced legislation to create new charges on development as the county faced a projected budget hole.
Minutes before the council voted on the issue late last month, members made amendments sought by developers. They reduced the charges, grandfathered projects already in the works and exempted new projects in areas targeted for redevelopment. The payments are also due later in the permitting process than initially proposed.
The new charges take effect in July 2020 but won’t apply to any projects whose developers submitted plans before that. The county probably won’t collect a full year of revenue from the measure until about 2023 because of how long it takes to plan, approve and build projects, Olszewski administration officials said.
Because the fees will be lower than initially proposed, the administration estimates they would raise about $5.7 million in the first full year, down from earlier projections of $10.3 million. The new estimate, though, doesn’t take into account the effect of credits and exemptions the council included in the final legislation.
“The county executive put forth measures that he believed were the best and most responsible way to increase revenues,” Olszewski spokesman T.J. Smith said in a statement to The Baltimore Sun. “Ultimately, the council made amendments to the legislative measures in the budget package, which passed in a bipartisan manner.”
Under Marks’ and Olszewski’s original proposals, the charges would have been put into place this year.
Among the exemptions added by the council are dozens of areas targeted for redevelopment: the county’s 18 commercial revitalization districts, three state-designated “enterprise zones,” and 10 federally designated “opportunity zones.” Housing developments for senior citizens also won’t have to pay. Neither will transit-oriented developments.
And the council gave country clubs slated for redevelopment extra time — they won’t be charged until 2021.
The council passed Marks’ bill, but incorporated elements of Olszewski’s. They voted on the bill in the midst of a package of other high-profile legislation, including the county’s first income tax increase in three decades and a controversial cell phone tax.
Negotiations on the development bill came down to the wire, council members said.
“I wish the final bill didn’t have so many exemptions, but you have to compromise to get legislation passed,” said Marks, a Perry Hall Republican, who added that there still are significant areas of the county that will be subject to the fees. “At the end of the day, I’m happy that we now have a system that requires developers to partner with Baltimore County.”
The legislation created both a new fee for residential development and an excise tax on commercial development.
The final bill charges developers of new homes 1.5% of the gross sale price, rather than the flat $10,000 for a single-family home proposed by Olszewski or $3 per square foot in Marks’ bill. Commercial developments will be charged per square foot, ranging from 80 cents per square foot for industrial projects to $1.50 per square foot for multi-family rental projects.
More than a dozen Maryland counties impose impact fees, which vary throughout the region. For example, Anne Arundel County’s fees depend on the size of a home or type of commercial development. Harford County charges flat rates — $4,200 for a townhouse and $6,000 for a single-family home.
The Maryland Building Industry Association opposed the legislation. The association commissioned a report by the Sage Policy Group that concluded that impact fees would have “unintended consequences” for the county. The report says developers would likely pass the fees on to buyers, and that the fees would discourage people from moving to the county.
Association CEO Lori Graf said the group remains concerned the fees will make housing less affordable and slow growth, but said “the bill as passed is definitely more balanced and more fair.”
Four council members sponsored the amendments, which the council voted on as one item — Councilwoman Cathy Bevins, Councilman Julian Jones, Marks and Councilman Izzy Patoka.
Council rules allowed them to vote on the amendments before giving the public a chance to read the changes.
Patoka, a Pikesville Democrat who co-sponsored Marks’ bill, said the country club exemption didn’t target one club in particular and was meant to give time for careful planning.
Jones, a Woodstock Democrat, said it seemed counterproductive to impose charges in districts where the government has tried to encourage development through tax credits and other incentives.
Bevins, a Middle River Democrat, said she believes developers will pass the fees on to home buyers. She said it was more fair to charge a percentage of a home price, rather than a flat fee, so that fees will be lower for those who buy less expensive homes.
Proceeds from the new charges will be set aside for schools, roads and public safety facilities. The residential fees can only be spent in the area of the county where the development occurs, while the commercial taxes can be spent countywide.
But with the amendments, it’s not clear how much money the impact fees and taxes will raise.
“The structure and the grandfathering [in the final legislation] will limit the revenues in the foreseeable future,” said Marsha McLaughlin, a Lutherville resident who advocated for the bill.
McLaughlin, a former planning director for Howard County, said the issue was a complex one for the council to tackle in a short period of time.
The council voted on the legislation only five weeks after it was introduced. When Howard County took up impact fees in the 1990s, McLaughlin said officials studied the issue for two years.
Phoebe Evans Letocha, a Towson High School parent who supported impact fees, called the legislation “a start.”
“I’m glad to see that it passed in some form and that there was some bipartisan cooperation and compromise,” she said. “This was all long past due for the developers to pay their fair share.”
Developer Steve Whalen said developers already help pay for infrastructure improvements near their projects. The county and state regularly order developers to do so as part of the development process, he said.
Whalen, a commercial developer based in Catonsville, advocated for provisions included in the legislation. They included credits for developers who make certain infrastructure improvements, and exemptions — such as one for properties considered “state hospital redevelopment.” Whalen has long eyed a portion of land at the state’s Spring Grove Hospital Center campus.
Politics made it clear the fees would pass in some form, Whalen said. The county was facing an $81 million deficit.
“I certainly understand what pressures the county was under,” Whalen said. “Let’s face it, nobody wants a new fee. But it was hard to argue when we were one of the [only jurisdictions] that didn’t levy these fees. It was hard to lobby against them completely.”
This story has been updated to correct the county administration’s projections for how much the new taxes and fees will raise in the first full year.