In some circles, Anne Arundel County's proposed "impact fee" on new business and house construction is revered as a relatively new and innovative model for localities whose populations are growing faster than their pocketbooks.
But some public policy experts across the country see it differently. Anne Arundel's plan is unreasonable, ineffective and possibly illegal, they say, and a mere political ploy to assess newcomers while avoiding raising taxes on current voters.
"In the case of Anne Arundel, it's an easy way out," said Thomas Snyder, professor of public policy and environmental affairs at Indiana University. "It's just a way to get around increasing taxes. These fees are simply ways to get extra money when the taxpayers decide they don't want to pay taxes anymore."
The County Council is to decide on Monday whether to become the first Washington area jurisdiction to impose impact fees countywide. Such fees are charges on construction of new businesses and houses to pay for the roads, schools and other services such development demands.
County Executive O. James Lighthizer, who proposed the revenue-raising plan, labeled studies attacking his proposal "reboiled tripe" and said he expects the council to support his controversial bill.
Impact fees were proposed by Lighthizer in April as a means of raising about $15 million annually. After facing strong opposition from potential home buyers, real estate agents and builders, Lighthizer proposed a 50 percent reduction in the fees on Monday.
However, the third, and most recent, version of the bill, which calls for a fee of about $1,000 per 1,000 square feet of office space and about $500 per single-family home, has received informal support from at least four of the seven members of the County Council.
National experts on the issue say impact fees are appropriate for areas with swiftly growing populations -- those growing much faster than Anne Arundel -- and that recent court decisions restricting the use of impact fees in other regions have raised questions about the appropriateness of the Anne Arundel proposal.
The experts contend that the county's 1 percent population growth rate, which is expected to decline to 0.71 percent by 2000, is well below the 4 to 5 percent rate that would justify levying the fee on new houses and other types of development. The Anne Arundel population growth rate, they add, is lower than that of any other region that has imposed the fees, and most of the jurisdictions using road impact fees have high growth.
High population growth indicates rapid future housing and business development and the subsequent need for construction of roads and schools. The new development can be paid for either by the current residents through higher property taxes or by new businesses and new home builders through impact fees.
For example, population growth in several other counties with impact fees, such as Florida's Charlotte, Collier and Lee counties, was greater than 30 percent in 1980-85, compared with 7.1 percent for Anne Arundel, according to Ronald Jonash of Arthur D. Little Inc., who studied all of the county's impact fee proposals for the Anne Arundel Trade Council. The populations of all of the 17 other impact fee jurisdictions studied increased faster than in Anne Arundel, Jonash said.
"Compared to other places where impact fees have been successful, we just don't see a comparable growth rate in Anne Arundel," said Michael Stegman, chairman of the department of regional and city planning at the University of North Carolina.
Impact fee experts also said that because of a recent U.S. Supreme Court decision, Nolan vs. California Coastal Commission, Anne Arundel's proposed fees could be found illegal if challenged in court. The decision said that collecting funds in one region and using them to cover costs of new roads and schools in another was illegal, a practice that may be possible under Anne Arundel's proposal, according to Gregory Girard, also of Arthur D. Little.
In addition, the court recently ruled in Jordan vs. Village of Menomonee Falls, Wis., that fees collected must be used only to cover costs of new construction as opposed to a backlog of needs. According to Jonash, in Anne Arundel fees expected to be collected are slated to cover the cost of future repairs on county roads, not work related to new development.
However, impact fee advocates assert that there are no hard rules in interpreting the legal decisions.
"There is no right or wrong on the legal issues," said James Nicholas, professor of urban and regional planning at the University of Florida and one of the county's advisers on the legislation.
The issue in Anne Arundel, as elsewhere, has centered on whether the cost of new school and road construction should be covered by the fees or by the more traditional, but less politically popular, property taxes.
"Impact fees can be a legitimate and useful tool in some places, but not in Anne Arundel County," Jonash said. "It would be desirable from a political perspective to have a revenue base that doesn't further tax voters, but the real question is are they legal and are they appropriate, and in Anne Arundel, they are not."
County officials, however, continue to defend the proposed legislation. They said that although they recognize that Anne Arundel's growth rate is relatively low, raising property taxes would be a less politically popular method of raising the approximately $15 million needed annually to offset the cost of new roads and schools.
"The major flaw" in the experts' arguments "is that they feel we should raise property taxes, and the council simply won't go for that," said County Council member Maureen Lamb. "The residents who have been here for a long, long time feel the new people should pay for the additional development."
"You'll never be able to tell the people in Anne Arundel County that we're not a high-growth county," Lamb said. "One's perception is often more important than the reality."
Lighthizer said, "It's irrelevant whether we're growing at a rate of half percent or 4 percent. If we're building 2,500 to 4,000 new homes each year, someone will have to pay for the new roads and schools, and the question is, who is going to pay for the new growth?"
Some experts, such as Florida's Nicholas, support Lighthizer's view. " . . . the question is, who is going to pay for the new growth?"
-- County Executive O. James Lighthizer
"If there were no growth rate, you wouldn't need them, but if there is any growth rate at all, impact fees are legitimate."
According to the Arthur D. Little report, an 8-cent property tax increase to $2.59 per $100 of assessed value would raise as much revenue as the impact fees, and would provide for tax benefits not permitted by the fees. For example, the federal government indirectly subsidizes 30 to 40 percent of all expenditures financed by local property taxes because they provide property owners with a federal tax deduction. That is not true for expenditures financed through impact fees.
In addition, Anne Arundel's property tax base is strong and growing at a rate of close to 9 percent annually, which experts said is adequate to support growth-related school and road needs.
In addition, the report said the tax increase would keep Anne Arundel tax rates equal to or less than the property tax rates imposed in all nearby counties except Howard and Prince George's.
Although county officials have argued that impact fees are needed to make "growth pay for itself," studies have shown that new development in counties the size of Anne Arundel does pay for itself. The new development generally creates a fiscal windfall through taxation of new businesses and increased economic vitality, rather than burdening existing taxpayers. Office and industrial development generally generates property tax receipts of five to 10 times the amount of money received by the proposed impact fees.
The proposed fees in Anne Arundel also are above the national average for counties with such fees. For example, in Pinelas, Fla., where the population has increased 10 percent between 1980 and 1985, the impact fee for 1,000 square feet of office space is about $700. In Palm Beach, Fla., where the growth rate over the same period has been 25 percent, the office space fee is about $400, compared with $1,000 in Anne Arundel.
County officials, however, contend that the fees for Anne Arundel were determined by the anticipated need for $15 million annually and not based on the level of fees imposed elsewhere.
Impact fees, experts say, are generally passed on directly to the consumer, and in other jurisdictions, such as Broward City, Fla., studies have shown that the fees might have helped prompt a surge in housing costs.
Yet, impact fee advocates argue that evidence to support this contention is inconclusive.
"Maybe the fees are passed on, maybe they aren't," Nicholas said. "It's my view that prices of houses are not related to what someone paid for it, but what price the market will bear."