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bob maginnis 2/18/01

February 16, 2001

Shank's tax compromise is worth a second look



You've got to give Maryland Del. Chris Shank some credit. At a time when it would be easier to side with his clueless compatriots, Sen. Alex Mooney and Del. Joe Bartlett, whose idea of deep political thought is to repeat "no new taxes" at every opportunity, Shank is trying to craft a legislative comkpromise that would give Washington County some cash for school construction and farmland preservation.

The county commissioners, whose Feb. 14 meeting with the delegation turned out to be something less than a lovefest, should look again at what Shank is offering, even if it seems like half of what they want.

What the commissioners asked for was a 1 percent tax on real-estate transactions that would have raised as estimated $1.2 million a year. The measure was opposed by real-estate salespeople and others who said it made no sense to add an estimated $1,000 onto the closing costs on a home sale at the same time the state was trying to reduce them.

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Delegation chairman Bob McKee tried to float a compromise - a half-percent tax that would have produced $600,000 a year for school construction before expiring in two years - but there was little support for it and he voted with his colleagues to kill the transfer tax idea Feb. 7.

At the time, Shank suggested the county use impact fees instead, but the commissioners said that although the county has had the authority to implement them since 1990, there's not enough growth here to justify jumping through all the hoops that are required.

This past Wednesday, Shank said he's had a chance to look into the impact-fee law, and agrees it's a complicated process. That's why he proposed the excise tax, which taxes new construction without all the complications.

Howard County just used such a tax to build a much-needed roadway, Shank said, and Frederick County wants to do the same to handle its transportation needs. But Shank also noted that after it was enacted in Cecil County, it was defeated in a referendum vote.

Shank says that given the 600 housing starts here a year, a $1,500 excise tax could bring in $1 million a year. The legislation could also be tailored to give a break to those who build within the county's urban-growth area.

"It's the impact fee without all of the baggage," Shank said.

How much "baggage" do impact fees involve?

Plenty, and much of it is political. When the idea was proposed in the late 1980s, the builders, developers and tradespeople put together a major effort to defeat it - and any county official who supported it. Full-page ads placed by the Washington County Home Builders Association bluntly noted that the group's 114 member businesses had 4,400 employees.

The idea surfaced again in 1997, drawing opposition again from builders. Ironically, David L. Corey, then the home builders' vice president, said that a real estate transfer tax would be a more equitable solution.

To find out how complicated impact fees would be to implement, I took a look back at the county's 1989 Impact Fee Study Committee and talked to the Frederick County officials who is in charge of implementing their program.

The report shows that after obtaining legsialtive authority to collect impact fees, counties must then establish districts where they will be levied, survey the existing infrastructure and establish what's called a "reasonable nexus." In plain words, government must show a relationship between the fee collected and the infrastructure that's needed to handle new development.

All of this means consultants, and Frederick County just had its second study on the county's infrastructure done last year, according to Mike Thompson, chief of development review for Frederick County.

Their fee, which ranges frm $6,000-plus for a single-family home to about $1,500 for aparatments and condominuims, brings in $5 million to $6 million a year based on an estimated 2,000 housing starts per year, he said.

Though Frederick County's fee only applies to schools and public library services, Thompson said the last consultant report looked at a whole range of services and concluded that a fee of more than $12,000 would be justified. But the county board, now as in 1993 when fees were first enacted, decided to go with a fee lower than the one recommended.

The county has also decided to stick with school and library services, Thompson said, because these are provided only by the county. To get into other services, like police, for example, would require calculating a different rate for those municipalities which have their own officers.

Another complication: Impact fees can only be used to maintain services at existing levels, Thompson said. For example, that means that they can be used to keep student-teacher ratios at 25-to-1, but not to reduce them to 20-to-1.

The uproar over the fees has subsided a great deal, Thompson said, because the builders find it easier to sell customers homes if the local schools aren't overcrowded.

The Washington County Commissioners are irked now, in large part because the opposition to new revenue measures is coming from elected officials who have little or no experience in local government, or business, for that matter. Shank's proposal may not be what the commissioners want, but the $1 million he promises is better than nothing.

Bob Maginnis is editorial page editor of The Herald-Mail newspapers.

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