Charging Developers and How to Spend the Money being Debated in Baltimore County
Baltimore County, facing overcrowded schools and congested roads, is considering charging developers impact fees. It’s a way to raise money to spend on the problems that developments create.
The Baltimore County Council is looking at dueling plans that differ on how the money would be spent.
What Baltimore County Executive Johnny Olszewski is proposing is, technically, not an impact fee. It’s an excise tax. That would allow him to spend the money collected from a developer anywhere in the county. Let’s say the developer is building new homes in Towson. The excise tax collected could be spent on schools in Lansdowne.
In an interview on WYPR’s Midday, Olszewski said that flexibility would help him deal with needs countywide.
“It’s really not about pitting neighborhoods against each other,” Olszewski said. “It’s about making all of the investments that need to happen. And this budget as a whole is about that.”
It’s part of a package of tax increases Olszewski is proposing to close an $81 million deficit while at the same time spend more money countywide on things like schools and roads.
Meantime, County Councilman David Marks is proposing an impact fee, rather than an excise tax. This would target the money collected from the developer to be spent on schools and roads in the part of the county affected by the development.
“Flexibility is great,” Marks said. “And I think Mr. Olszewski is a lot more trustworthy than his predecessors. But we need to make sure that some funding stays locally.”
Both Marks, a Republican, and Olszewski, a Democrat, said they are working together on a compromise. Marks said it might look something like this: an impact fee would be collected on homes and spent locally. An excise tax would be levied on commercial construction and that could be spent anywhere in the county.
“So that does give him some flexibility over a sizable amount of the money,” Marks said. “But it does ensure that a lot of the residential impact fee revenue comes into the local communities.”
16 of Maryland’s 23 counties, including Howard, Harford, Frederick, Carroll and Anne Arundel, charge impact fees or excise taxes. Daraius Irani, chief economist for the Regional Economic Studies Institute at Towson University, said Baltimore County should join them.
Irani asked, “Why be the odd duck out?”
Call it what you will, a tax or a fee, whether it’s a good idea at all was contested at the County Council’s public hearing on the budget last week.
A number of people in the building industry opposed it. For one thing, they said developers likely will just pass the cost on to buyers and renters.
Also, Gabrielle Duvall, General Counsel for Southern Management Corporation, said her company was making plans for new apartments, a hotel and retail in Pikesville, until they heard about the proposed impact fees.
“This surcharge would cost $8 million before we got off the ground and make our project economically infeasible,” DuVall told the council.
But the council also heard from Marsha McLaughlin, who lives in Lutherville and recently retired after 13 years as director of Howard County’s planning and zoning department. McLaughlin said Howard County passed its excise tax in 1992 and the developers are used to paying it. McLaughliin added developers like Howard County because the county has services that make people want to live there.
“If Baltimore County does not invest in these services the developers will go elsewhere,” McLaughlin said. “And it won’t be because of the fees. It’s because people don’t want to be in this market.”
Olszewski’s proposed budget estimates the excise tax would raise nearly $8 million its first year. It’s not expected to be a big moneymaker for the county, because much of its developable land has been developed. Baltimore County had to get General Assembly approval in order to put a fee or a tax on developers. It pushed for it in the 2019 legislative session and got the green light.
Councilman Marks said he believes the legislation in some form will pass the council.
He added that developers have a point about slapping a charge on projects already in the pipeline and that perhaps the fees could be phased in.
The Baltimore County Council plans to vote on Olszewski’s budget May 23.