A plan to raise millions of dollars from developers for roads and rail lines is emerging as the next big test of Montgomery County's commitment to making sure growth pays for itself.
The County Council is to begin considering legislation today that would create Montgomery's first countywide development tax and revise a speedy permitting procedure known as "pay and go." The upshot would be significantly higher costs for developers: In some areas, builders would pay as much as $8,000 per home. The council wants to use the proceeds for much-needed transportation projects.
The proposal marks a first for Montgomery, which traditionally has used strict regulation rather than taxation to manage growth. But it comes as many jurisdictions in the Washington region are demanding more from developers in return for the right to build as country roads and interstate highways constrict with traffic.
Loudoun County officials recently raised voluntary development taxes to almost $11,000 per home, while Prince William County has set a schedule for developer fees to exceed $15,000 per home in two years. Montgomery's proposed rates would rank it in the middle of the pack among Maryland counties that impose development taxes.
Montgomery's building industry already is threatening to fight the development tax unless it receives assurances that cumbersome county regulations will be scaled back in return. Developers question the tax's fairness when other Montgomery residents and businesses who use county roads and intersections are not asked to pay anything.
"Are council members going to [reexamine] this very complicated regulatory approach now that they are going to a tax approach?" said Gus Bauman, a land-use attorney and former Montgomery Planning Board chairman. "If they don't, we could have a system where it's more expensive and just as complicated."
Already Montgomery's growth policy is shaping up as the next major battle between a recently elected council and the business community, which have clashed several times over the past eight months.
Montgomery County Executive Douglas M. Duncan (D) is joining the fray early, concerned that a development tax without regulatory reform could slow down the economy. Three years ago Duncan vetoed legislation that would have expanded a development tax affecting Germantown and eastern Montgomery to other high-growth areas, fearing it would send an anti-business signal. "If this tax is something that will help bring simplification and certainty to people building in the county, then it could help," Duncan said. "If it adds layers on top of this review process it will only make it more difficult."
Adopting a countywide development tax would mark a shift in the philosophy that has dictated Montgomery's growth since the 1970s when, under the iron-hand leadership of Norman Christeller, the county became famous for elevating land-use planning to a political art. Christeller and his followers saw shrewd planning as a way to right social wrongs, protect the environment and foster commerce.
At the time, Montgomery planners made a decision not to impose taxes to further those goals. Rather, planners decided to use strict zoning rules and case-by-case developer fees to provide the roads and other public services needed to serve new projects.
The development tax proposal arriving today is part of a broader discussion that will unfold this fall over the county's so-called Annual Growth Policy. As drafted, the proposal would keep existing rules in place while imposing the countywide development tax on top of it. Several council members like the idea, but Bauman calls it excessive, a "belt-and-suspenders" approach to holding up growth.
The tax would raise an estimated $6 million a year from the private sector that could be used to supplement road and intersection work that developers now are required to do on their own. Projects near Metro stations would be exempt. The county would match the tax proceeds, hoping to signal developers that it is serious about making sure their money makes a difference.
In return, planners would allow about 30 percent more development than is currently permitted by removing from planning books projects that have been approved but never built for lack of financing or other reasons. Developers have long asked that old projects be cleared from the system so that ready-to-go projects could move forward, even in areas now under a construction moratorium.
"One element is to streamline the process to take advantage of the capacity we have," said William H. Hussmann, chairman of the Planning Board. "The second is to figure out how we will come up with funding to accommodate the increased growth."
The development industry has supported past plans to raise money for transportation projects, including one that spread the pain of taxes over several interested parties. Five years ago, builders endorsed a proposal that called for the county, developers and Montgomery homeowners and businesses to pay into a fund for transportation projects.
The plan would have required two new taxes--one paid by every Montgomery home and business owner. Endorsed by the council, the plan did not become law because of opposition from Duncan, who was reluctant to impose the additional taxes.
"We supported the three-legged-stool approach," said David Flanagan, a residential developer who is the Maryland National Capital Building Industry Association's Montgomery liaison. "That has done nothing but sit on the shelf. And so far one leg of the stool has not shown up in this."
Under the new proposal, the development tax would range from $1,500 to $3,500 per house or apartment and 75 cents to $2.50 per square foot of commercial construction. When added to other fees developers pay to speed projects through the review process, builders could soon be paying the county as much as $8,000 per home--almost twice the current maximum of $4,500. The cost, developers say, is typically passed on to home buyers. Duncan and some council members say the building industry will not accept those high prices without a fight unless they receive regulatory concessions in return.
"We'll have a bloodbath if the only thing on the table is a development tax," Silverman said.