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Study: Updated development ordinance could cost Howard $1 billion in revenues

While the update to the adequate public facilities ordinance passed last year by the County Council could cause Howard to forgo $1.02 billion in net revenue by 2038, it likely will not be detrimental to the county’s bottom line, according to a study by the county’s Department of Planning and Zoning.

The ordinance, which narrowly passed the council in February 2018, was designed to mitigate the ever-increasing county population’s impact on roads and schools, including by limiting residential development in areas with overcrowded schools.

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The study, prepared by Urban Analytics, the University of Baltimore’s Jacob France Institute and Artemel & Associates, states that while Howard County is projected to forgo potential net revenue of $136 million by 2024 and more than $1 billion by 2038, revenue from development that takes place will act as an offset and help pay for projects and public services that support communities.

“New residential development not only ‘pays its own way,’ it also subsidizes existing residential units in the county,” the report states. Most of the impacts of the amendment to the adequate public facilities ordinance are felt in the first six to 10 years of the 20-year forecast period, according to the report, which was released Aug. 2.

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The update to the adequate public facilities ordinance was heralded by advocates who saw it as a way to tackle school overcapacity and criticized by entities like Maryland Building Industry Association that predicted it would have a significant negative impact on the county’s finances.

Researchers with the study analyzed the impact of the ordinance on the county’s General Plan, which guides government decisions related to development, land preservation, services, capital projects and more. They created a fiscal model that calculated revenues and expenditures in residential and non-residential sectors and then determined where the money was going.

Though the study projected the county would forgo potential net revenue by limiting development through the ordinance, long-term cost savings associated with the avoidance of infrastructure outlays were $865 million by 2038.

The report also found the application of the APFO amendment resulted in the net reduction in county revenue of $64 million by 2024 and $152 million by 2038, as “projected foregone revenues, exceed projected expenditure savings," the report said.

According to the study, the county could see a reduction in its anticipated population growth. The county, which had a population of 317,999 in 2017, is projected with the ordinance to have a growth rate per year of 0.47% — to 354,430 residents by 2040 — under the General Plan forecast. Without the ordinance, the study projected a growth rate of 0.66%.

The study also found the implementation of the ordinance could reduce a projected enrollment of 9,289 new students from new housing developments into the school system by 2,420 students over a 20-year period.

In the business sector, the county job market would expand at a slightly slower pace under the ordinance, by 0.95% as compared to 1.03% without it.

The county asked the study’s consultant team to run an analysis that includes the school surcharge tax at a higher rate. Researchers also recommended the county test a change in certain tax rates including real estate property, road excise, and the fire and rescue tax.

Last month, the County Council legislated a school capacity test for developers seeking to build new houses, putting a four-year moratorium on new homes near elementary schools that are 105% over capacity, 110% for middle schools and 115% for high schools. If the project fails the test, it can be retested every year to see if it meets capacity guidelines.

By the fourth year, even if it fails to meet those guidelines, it is still “deemed to have passed the school capacity test,” the law states. Legislation filed by Councilwoman Liz Walsh that would have extended the wait period to seven years failed to pass.

The study researchers also recommended running a scenario in which the four-year term is extended to seven.

In late April, Board of Education Chairwoman Mavis Ellis testified that the ordinance would exacerbate the loss of student enrollment and “decrease revenues used for school construction, but also taxes that fund operational budgets."

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Last month, however, the school board reversed course, submitting testimony that said the four-year wait time for construction is not "sufficient to enable the school system to plan, develop finance and build additional infrastructure.”

The study used current school capacity levels. The Board of Education is schedule to redistrict school boundaries to reduce overcrowding in November.

“If we do our job right, the schools will fall below the capacity threshold,” said school board member Vicky Cutroneo. “But it’s not going to be the cure everyone thinks because of our rate of growth.”

In a 2018 study, Maryland’s Department of Planning projected Howard County public school enrollment would increase by 14.5% by 2027. Howard’s projected rate of growth is the highest among all counties. Dorchester County’s projection ranked second with a 10.1% increase by 2027.

“It’s a temporary fix to a long-term issue," Cutroneo said of redistricting.

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