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Republican legislation would pay landowners because of septic system restrictions

Republican state legislators have filed bills aimed at helping landowners who could potentially suffer property value losses caused by state restrictions on major residential developments served by septic systems. But even proponents of the bills are calling them long shots, and detractors deny that the state's development restrictions will have a negative impact on property values.

The bills - House Bill 576 and Senate Bill 176 - seek to assist landowners whose properties have dropped in value due to the Sustainable Growth and Agricultural Preservation Act of 2012, which aims to restrict residential subdivisions served by septic systems.

Specifically, the 2012 septic law allows for Maryland's 23 counties, their municipalities and Baltimore City to draft a map with four tiers to plan for growth. Properties in the fourth tier would be restricted from building major residential subdivisions served by septic systems. Jurisdictions that did not create a growth map are restricted from approving any large residential subdivisions that are hooked up to septic systems.

The restrictions are meant to reduce nutrient pollution from septic systems that affect local waters and the Chesapeake Bay, and to preserve agricultural and forest land.

Opponents of the state's septic system restrictions believe that property values will drop for landowners who have lost development rights. This is of particular concern in rural areas, where many properties cannot be connected to public sewer systems.

House Bill 576 requires the state to pay landowners whose property values have been reduced due to septic system restrictions. The payments would be based on an average of estimates made by three appraisers - one from the Maryland Department of Agriculture, one appointed by the landowner and another that the latter two appraisers agree should submit an estimate. If an agreement cannot be made on a payment, the MDA or the landowner can take their case to the Property Tax Assessment Appeal Board.

Senate Bill 176 would create an income tax credit for owners of agricultural land who have had their property values diminished due to the septic law. The bill would also create a tax credit for those who have lost value to their properties due to state-mandated nutrient management plans, which require farmers to control the flow of harmful nutrients from their fields to local waterways and the Chesapeake Bay.

"How can a state willy-nilly say that you have special categories of property rights, and those are people who live in cities and urban areas, and everybody else has inferior property rights?" said Calvert County Del. Mark Fisher, R-District 27B, who introduced HB 576. "That's just wrong."

The Republican bills are opposed by the Maryland Department of Planning, the state agency reviewing jurisdictions' growth maps. Officials with the department do not expect property values to drop due to the septic law. The department notes that sales data of agricultural land in areas with more restrictive zoning compared to similar land in areas that have permissive zoning demonstrate that land values are not necessarily affected by septic system restrictions.

The fiscal and policy note attached to HB 576 also says that there have been no apparent effects on property values due to the septic law based on county assessable base data. In fact, property in rural areas on average declined in value less than urban properties from 2012 - the year the law was passed - to 2014, the fiscal and policy note says.

But others are not so sure the bill would have no effect on property values. Phil Hager, director of Carroll County's Department of Land Use, Planning and Development, said appraisers who work with the county's agricultural preservation program have said the septic law has caused a lot of uncertainty with regards to property values.

"Property values are determined to a large extent by the number of development rights that you have," Hager said. "And right now, development rights are determined by zoning. As the state law artificially limits what's allowed, then it diminishes the value of your property, because it reduces the amount of development rights you have."

The Maryland Farm Bureau supports the two bills that it says would help landowners. Valerie Connelly, the bureau's executive director, said many farmers have land that can be developed, but are now restricted by the law.

"We have always believed in compensation if you are going to take somebody's land value," she said.

But the bills to help landowners face long odds in the Democrat-controlled Maryland General Assembly. A bill introduced last year by Republicans to repeal the septic law died in committee.

Even Fisher, the author of HB 576, acknowledged his proposal faces challenges getting passed, unless people speak out on the issue and understand how it will affect them.

"It's going to be tough to get a bill like this passed," Fisher said. "But we do have, of course, many, many thousands and thousands of people who are affected by [the septic law]. It's the right thing to do."

Both bills are expected to be costly to the state, although accurate estimates cannot be made, according to their fiscal and policy notes.

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