MacRo LTD Blog

Tax Tempest in a Teapot

It may only be raining pennies, but Frederick County is doing its share to Save the Bay.

Tax Tempest in a TeapotWe often hear local politicians complain that Frederick is treated like a redheaded stepchild in Annapolis.

It doesn’t help being a county that stands out red in a sea of blue come election time, or that Frederick’s conservatively-leaning political leaders don’t hesitate to wage war against the seemingly endless regulations and taxes raining down from a governor with his eye on the White House.

The Rain Tax is a prime example of a negative perception of Frederick County cultivated through political posturing and brinkmanship of both sides.

If you aren’t familiar with Maryland’s Storm Water Remediation Fee (or “rain tax” as the development community has affectionately dubbed it), you can read the MacRo Report post “Rain, Rain, Go Away–Before O’Malley Taxes Us Another Way.”

In brief, the State of Maryland passed a bill last year that requires 10 of Maryland’s most populated counties to establish a “fee” to fund storm water mitigation retrofits.  These retrofits are one of a number of strategies adopted by the Maryland Department of the Environment (MDE) to meet the unfunded mandate set forth by the EPA to clean up pollution in the Chesapeake Bay and surrounding watershed.

It should come as no surprise that Maryland is the only state in the Chesapeake Bay watershed to pass legislation establishing mandatory fees to fund unfunded EPA mandates.

Frederick’s Board of County Commissioners struck back at what they felt was an unnecessary piece of legislation when they set Frederick’s storm water remediation “fee” at one penny per eligible taxpayer per year.  The BoCC made their point (and garnered a good deal of publicity) but created a storm of controversy in the process.  Frederick County has since been falsely accused of being anti-environmental and of putting it’s water quality–and by extension the Chesapeake Bay–in jeopardy.

The truth is, Frederick County is in fact contributing a great deal of effort and money toward keeping local streams and watersheds clean.

Frederick County’s Department of Business Development & Retention recently gathered the real estate and development community for a Rain Tax Forecast.  A panel of three presenters gave an overview of how taxpayers and developers alike will be impacted by Maryland’s implementation of the unfunded mandate sent downstream by the EPA.

Panelist Shannon Moore made some very interesting points during her presentation at the Rain Tax Forecast.  Moore is the manager of the Frederick County Office of Sustainability & Environmental Resources.  This department is charged with executing “practical solutions for protecting the environment, conserving energy, and living sustainably in Frederick County, Maryland.”

First, and most importantly, Moore highlighted the fact that while Frederick’s penny fee will generate only about $490 per year, Frederick County has in fact spent $2.5 million per year on storm water permit compliance and retrofits during the past 10 years (a total of $25 million), allocated from the county’s general fund.  In fiscal year 2014, the county increased that allocation to $3.5 million per year (or about $73 per eligible tax account).

In other words, instead of raising taxes to fund water quality improvement and protection measures, Frederick County has been allocating money currently in the budget.  This approach is similar to that adopted by Carroll County , as well as by other states impacted by the EPA mandates to clean up the bay.

Moore also explained the MDE has multiple goals–the MDE’s Watershed Improvement Plan calls for nutrient pollution reduction, whereas its Stormwater Permit program goal is impervious surface area reduction–and these goals don’t align.  In fact, impervious surface area reduction has evolved into a program of retrofitting urban properties that lack stormwater treatment systems, or have systems installed prior to 2002 (which was the year stormwater management systems were required to filter out pollutants and sediment as well as decrease runoff).

Moore broke down the costs per tax account of MDE goals to mitigate pollution from nutrient pollution and stormwater runoff.  If Frederick County were to pay for these goals through a stormwater utility fee, these charges would amount to:

  • Annual Cost of Frederick County’s current MS4 Stormwater Permits:  $72.96
  • Estimated annual Cost of Frederick County’s next MS4 Stormwater Permit (draft): $524.12
  • Estimated annual Cost of including all MDE 2017 Watershed Improvement Plan goals (including nutrient pollution reduction) in the next permit:  $1,678.45

Retrofitting existing urban development to meet EPA/MDE goals for runoff and water quality is VERY expensive.  According to Moore, “Maryland has set the bar higher than any other state in the country.  No where else are we seeing the same amount of urban retrofitting that Maryland is requiring because of the bay.”

Here’s another fun fact: new development projects with Maryland’s required state-of-the-art stormwater management systems in place actually generate LESS pollutants than raw land, an outcome that the State of Maryland did not anticipate, nor quite knows how to deal with.

Frederick’s cost to meet the 2017 stormwater requirements in the MDE’s Watershed Implementation Plan (WIP) is $342,938,004.  If that cost were to be placed squarely on the shoulders of Frederick’s eligible property tax payers, each would pay an additional $1,678.45 extra per year.  The total for Frederick to meet the MDE’s stormwater WIP goals for ALL permit holders by 2025?  A shocking $1.5 billion.

It quickly becomes clear that whether the county is collecting $0.01 per taxpayer, or like Baltimore City levies $144 per taxpayer (the highest stormwater fee levied to date), these “fees” are a mere drop in the bucket towards meeting the lofty goals of the EPA and the MDE.

All of this tempest in a teapot over Frederick County’s stubborn refusal to toe the line on the rain tax has served to camouflage a far more urgent concern:  Maryland’s governor may look like a hero in Washington for his environmentally friendly stance, but he has passed the buck to the counties and municipalities he serves.  How will Maryland’s taxpayers ever begin to shoulder the burden of saving the bay?

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The author: Kathy Krach is a commercial sales and leasing agent with MacRo.

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