Call it the $13 million phrase.
Left mistakenly in the fine print of a law passed by the General Assembly two years ago, the wording "applied for" opened a legal loophole that allowed Prince George's County developers to avoid paying $13 million more in surcharges -- money intended to help the county build desperately needed schools.
And lawmakers acknowledge that the error escaped their notice until it was recently unearthed by two sleuthing activists, dubbed "the PTA Moms" by county officials.
The saga of the surcharges is part of a broader debate over the pressure that growth places on school districts and what burden developers should bear in financing new classrooms to accommodate increased enrollment. With Prince George's property taxes limited by a voter-imposed cap, new development provides one of the few sources of fresh revenue for school expansion.
The surcharges have taken on an even greater importance since Maryland, facing a projected budget shortfall, announced that it is slashing school construction funds to Prince George's next year from $35 million to $4 million.
The county first imposed the surcharges in the mid-1990s, when it established a $2,500 fee on building permits for each new unit of housing. In 2000, the General Assembly authorized the county to double the fee to $5,000.
And that's when the $13 million began to slip away from Prince George's.
The law set July 1, 2000, as the effective date of the $5,000 surcharge. The problem was Section 17, Line 13. It said that the costlier fee would be charged on new residential construction permits "applied for" on or after July 1, 2000. As written, it meant that any permits applied for before July 1 qualified for the $2,500 fee. Developers would then have up to two years to clear various regulatory hurdles and obtain permits.
Lawmakers intended the law to say that the new surcharge would be placed on all permits issued on or after July 1.
The bill's sponsor, Del. James W. Hubbard (D-Prince George's), said that the language in the bill was drafted by the General Assembly's Department of Legislative Services but that he erred in not reading the final version more carefully.
The development community was paying closer attention. In June 2000, builders filed nearly a year's worth of applications (2,728) for new housing units (the annual average is about 3,000). In the month after the new fee went into effect, the county received applications for just 41 units.
The amount of money at stake was considerable. Under the higher fee, 100 units of housing in Prince George's would cost a builder $500,000 in surcharges, as opposed to $250,000.
"I told them it was going to go up," said Tom Haller, a lawyer who represents developers in Prince George's County. "Everyone in the building industry was aware of what the state imposed as the deadline. We told them the bill provides for a higher fee for any permits applied for after such and such a date. Everyone understood if they were in position to apply for permits, they should."
Hubbard, who is generally critical of developers and their allies in county government, was chagrined about the opening the law offered to builders. "They found a loophole and utilized it," he said.
Hubbard learned of the mistake not from state or county officials but from "PTA Moms" Donna Hathaway Beck and Linda Owens. Beck and Owens have made it their mission to bird-dog politicians, developers and land-use lawyers. Until October, Beck was president of the Frederick Douglass High School PTA. Owens is a former Douglass parent. They met 12 years ago at the Suitland ward of the Church of Jesus Christ of Latter-day Saints, where Owens taught Sunday school and Beck played piano.
Over the years, the two have become formidable players in county politics, primarily by mastering the arcana and minutiae of planning and zoning, especially as they relate to schools and growth.
Beck calls herself the "people person" and Owens "the brains" of their operation, which includes boxes of files, a Web site and Beck's dining room, which converts to a "war room" when they are in the midst of a project. In 1997, they helped persuade the County Council to pass the first development cap in Prince George's, banning new construction in areas where school enrollment was 130 percent or more of capacity.
Beck and Owens discovered the surcharge loophole by accident, as they went through documents they'd requested on another development matter. What they found was a Sept. 3, 2002, report, prepared by the county as required by state law, on the impact of the schools surcharge. The document, which carried a cover letter from then-County Executive Wayne K. Curry (D), had been circulated among county officials. But information about the rush to beat the July 1, 2000, deadline was buried and had gone unnoticed.
"It was serendipity [that] we stumbled on it," Owens said. "We hadn't even asked for it. We thought everything was hunky-dory."
The report showed that the county hadn't received anywhere near what was expected from the surcharge increase: $16.9 million instead of the anticipated $30 million-plus over two years.
County officials who were aware of the rush of applications before July 1, 2000, said they saw nothing out of the ordinary. "Any time you have a change, there's usually a run on permits, people planning on getting ahead of the law change," said Dominic J. Motta, chief of countywide planning in Prince George's. "It's like planning for your taxes for next year. You try to get things worked out in December, maybe take deductions, address capital gains."
Beck and Owens were not quite as nonchalant.
"It's disappointing there's no oversight on such a significant issue," Beck said, "and the kids lose every time."
Hubbard is taking another crack at raising the surcharge. This month, he introduced a bill for consideration by the upcoming General Assembly that would again double the fee, to $10,000. This time, it would apply to all permits issued after the law goes into effect July 1. With an average of 3,000 permits a year, the surcharge would produce $30 million for school construction.
"It's the bill of the year," said Joan B. Pitkin, a former delegate and now a lobbyist for the county government in Annapolis. Pitkin said she voted for the earlier surcharge increase but didn't know until talking to Beck that it had a loophole. "That very much is flying in face of the legislative intent," she said.
Developers say they could support doubling the surcharge again if the county drops an additional "adequate public facilities" fee it passed in 2001 of up to $4,950 per unit. That "pay-go" law allows new housing in areas with overcrowded schools if the builders pay the fee, on top of the surcharge.
Prince George's planners estimate that a new school is needed for every 1,100 new housing units. Builders dispute this, asserting that the increase in the public school population is due more to younger families already living in the county.
"It's coming from current residents and resales," said Chip Reed, a lawyer who represents builders. "People buying these new, more expensive homes are largely current county residents moving up."
All sides agree that overcrowded schools affect student performance as well as the county's ability to lure desirable companies and their more affluent employees to Prince George's.
"Our concern," said F. Hamer Campbell, of the Maryland-National Capital Building Industry Association, "was you're adding additional costs and preventing many applications from going through, and you don't get the money, so what's the point?"
Beck and Owens said they're not knee-jerk opponents of growth. While they have lobbied hard for fees and surcharges, they have also staked out positions not always in sync with the anti-growth camp, and they have kept up a dialogue with the developers.
For now, though, they are working hard on behalf of Hubbard's newest surcharge bill. They are still steamed about the last piece of legislation and the $13 million that slipped away.
"It just rolled away through their hands," Owens said, "like sand."