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Local stimulus program lauded for hike in new home construction

April 11, 2010|By HEATHER KEELS

WASHINGTON COUNTY -- A local stimulus program is credited with more than tripling the number of new homes started in Washington County from Oct. 1 through March 26, compared to the same period a year before, county permits and inspections director Daniel F. DiVito said.

During that time period, construction permits were approved for 78 new homes, compared to 25 a year before, DiVito said.

The stimulus program, which provided incentives for residential construction, ran from Oct. 13 through March 26. It was approved by the Washington County Commissioners last fall as a way to boost construction-related employment and make home building more affordable.

The stimulus included an excise tax credit, a permit fee reduction and a recordation tax break.

To keep the incentives, builders will have to complete a framing inspection within six months of permit issuance and receive a use and occupancy certificate within 18 months.

Eligible homes and additions were granted a credit for the excise tax due on up to 2,500 square feet.

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Excise tax is assessed per square foot of new construction and is used to help schools, roads and other infrastructure keep pace with new development.

During the program, the county granted $548,898 worth of excise tax credits, DiVito said.

Many of the homes started were larger than 2,500 square feet and excise tax was paid on the additional square footage, he said.

The county collected $241,143 in excise tax on new homes from Oct. 1 through March 26, not far behind the $247,017 collected in excise tax on new homes during the same period a year before, DiVito said.

"I think we can all agree, again, that that's well worth the investment in the community," DiVito said. "There's an awful lot of people working with 78 houses being built as opposed to 25 last year."

The program was less economically beneficial when it came to additions to homes, DiVito said.

There were 51 additions approved from Oct. 1 through March 26 and $3,128 collected in excise tax on additions, DiVito said. In the same period a year before, 42 additions were approved and $30,859 collected in excise tax on additions.

The program also reduced building permit fees 50 percent on eligible projects and waived permit fees entirely for energy-related projects. DiVito said the 50 percent reduction cost the county almost $26,000 in permit fees and the energy-related permit waivers cost $7,700.

The program was suspended March 26 when it had been applied to about 200,000 square feet, the maximum agreed upon by the commissioners when they extended the program at the midway point.

At a March 30 commissioners meeting, Lisa Conrad, co-owner of Conrad Homes, encouraged the commissioners to extend the stimulus program again.

"I think you really need to consider the jobs that people are creating by having that lower tax," Conrad said.

She said the home construction company she and her husband own in Hagerstown dropped from 50 employees to its current seven in a period of four years as the economy worsened.

In the past two years, the company has been hired to build only one home, and that one home was possible because of the stimulus program, Conrad said.

The cost of excise tax, permit fees and recordation tax is passed on to the buyer and has to be paid upfront, so reducing those expenses can make building a new home more feasible, Conrad said by phone last week.

"In this economy, people don't have that expendable income to put right upfront," she said. "It's not something they could put into a mortgage. (With the incentives), people are more apt to say, 'Hey, I do have that.'"

Hagerstown resident Richard Gruber, who originally suggested the stimulus program, made a similar point about the high upfront costs he encountered for a new home he is building, DiVito said.

Conrad said her company has gotten by on other work such as remodeling. The business would have to get a lot more work to hire any new employees, she said.

The commissioners said they would discuss at a future meeting whether to extend the program.

Commissioner Kristin B. Aleshire, who voted against the stimulus program initially, said he still thought any program ought to include a transfer tax break to help sell existing homes and ought to apply to 50 percent of the excise tax on any home instead of those up to 2,500 square feet.

Aleshire also questioned whether the property tax gained from additional home building was worth the much larger loss of excise tax, which he said would have to be made up by the taxpayers in some form when the growth took its toll on infrastructure.

DiVito said by phone that some of the homes that received the excise tax break were part of developments where developers were making mitigation payments to help build that infrastructure. Mitigation agreements are necessary for certain projects under the county's Adequate Public Facilities Ordinance, which was not affected by the stimulus program.

Aleshire noted that many local government officials from elsewhere in the state were surprised to hear about the stimulus program's success. Many places are increasing fees in an attempt to make up for declining construction, whereas Washington County decreased its fees and "actually gained at the end of the day," Aleshire said.

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