Walt Townshend: The Nearly-Stealth Fee That Needs to Be Delayed and Rethought

By H. Walter Townshend

Come the first week of July for many Marylanders, the annual tax bill will arrive with an added line: “stormwater management” or “impervious surfaces” fee. For residential property owners, the fee will be an irritant, but manageable, on the order of $35 to $200, depending on whether it’s a condo/townhome, single family house or larger residential/agricultural property.

However, for non-residential properties, including those currently exempt from property taxes such as private schools, non-profits and churches, the fee will likely be a huge shock, ranging from $600 to nearly $3,000 per acre of impervious surfaces, under current legislative proposals.

For some major employers in Maryland, the fee will exceed $300,000; for a parochial school it may mean $6,000. A golf course may have a fee of nearly $7,000 for the golf cart paths alone. Another irony is that for some property owners, the impervious surfaces fee will exceed the property tax bill.

If you are not familiar with an “impervious surface” or the fact that you may soon be paying for having some, a nearly stealth mandate is coming to 10 jurisdictions in Maryland: Anne Arundel, Baltimore, Carroll, Charles, Frederick, Harford, Howard, Montgomery and Prince George’s Counties and Baltimore City. Why these 10?

In the 2012 Session of the Maryland General Assembly, HB 987 was enacted, mandating that these jurisdictions—holding a Phase One Municipal Separate Storm Sewer System (MS4) Clean Water Permit issued by the Maryland Department of the Environment— adopt and implement a local watershed protection and restoration fund program. In addition, they were to develop a stormwater remediation fee. The programs and fees are to be in place by July 1, 2013.

The fee applies to all property owners except for property used for a public purpose and owned by the State, a unit of the State, a county, a municipality or a regularly organized volunteer fire department. Further, the fee is separate from any charges established for new development, to include plan review, permits, inspections, etc. Municipalities within the counties may develop their own programs and fee, or elect to follow those set by the County.

Currently, four of the ten jurisdictions have proposed legislation being considered. It remains unclear as to when the others will bring forward proposals, but the July 1 deadline draws ever closer.

So, just what is an impervious surface? It is generally defined as a surface that does not allow stormwater to infiltrate into the ground, which includes buildings, sidewalks, driveways, parking lots, patios and even swimming pools.

How does one determine how much impervious surface is on a property? Technology has provided satellite imagery and Geographic Information Systems (GIS) software that allow technicians to define and measure these surfaces without setting foot on the property, displaying the parcels’ impervious features with color coded designations.

How can a property owner see these GIS images being used to determine the fee? There’s the rub, as only one jurisdiction, Anne Arundel, has an online Watershed Mapping Application that can be accessed by the public, as long as you know how to use GIS protocols. When asked how owners can understand the impact, some county officials have responded with a variation of the Pelosi Principle: “We have to enact the impervious surfaces legislation in order for you to know the impact of the legislation.” In short, after the legislation is passed, the plan is to “educate” owners about the impervious surfaces and the fees they will have to pay. Surely every property owner has the right to know the amount of impervious surface on property before any legislation is passed.

Are there offsetting credits that can reduce the fees an owner must pay? In most jurisdictions, credits of up to 50 percent of the total fee are being proposed. Credits are dependent on the existing and operational stormwater management systems that reduce the amount of, or improve the quality of, stormwater from the property’s impervious surfaces. Why 50 percent and not 60 or 70 or even 80 percent? No one can clearly provide an answer, but HB 987 is silent on the amount of credit that may be allowed. Owners holding a National Pollutant Discharge Elimination System (NPDES) permit are truly baffled, arguing that they are paying twice for the systems they already have in place. One permit holder shared that the annual maintenance of existing systems approaches $200,000, and questioned why they should be charged another $80,000 annually as a fee.

It is also incumbent on the property owner to apply for the credits. Most legislation does not include the requirements for application for credit, criteria for determination, deadlines, etc., stating that these processes will be determined by departmental “regulation.” It is conceivable that credit applications could require certification by a licensed professional engineer, adding further to the economic burden. Should not these regulations be available for review before any legislation is passed?

What if a property owner has an economic hardship? HB 987 mandates that there be provisions for such hardships, but some legislative proposals provide them only to residential property owners, and not to non-residential owners. Why?

As the impacted jurisdictions are dealing with the mandate—some happily so—legislation is being considered in the current session of the General Assembly to include state properties (with some exceptions) as well as to exempt Frederick County from the list. On the federal level, Virginia’s Attorney General just won his case on this very issue regarding stormwater in Fairfax County, with the court’s ruling that “…storm water runoff is not a pollutant, so EPA is not authorized to regulate it.”

A recent decision by the United States Court of Federal Claims in Georgia held that the stormwater management charges assessed by DeKalb County, Georgia were taxes. “The charges are set by the County’s legislative body, they are imposed on every owner of developed property in the unincorporated portion of the county, and they are used to provide benefits that are enjoyed by the public as a whole,” the Court stated.

If such a ruling applies to Maryland, it could present a significant problem for those jurisdictions with tax caps. Indeed the fiscal and policy note for HB 987, prepared by Maryland’s Department of Legislative Services, telegraphed as much: “In jurisdictions that have a charter limit on their property taxes, establishing a stormwater remediation fee may necessitate an offsetting reduction in some other property tax, to the extent the fees established under the bill are considered property taxes.”

No one disputes the need to protect the health of the largest estuary in America and its tributaries, but the proposed legislation in some jurisdictions, the lack of legislation in others, and the multitude of questions surrounding all the proposals call for the Maryland General Assembly to delay implementation of these programs for one year, until July 1, 2014.

This will allow property owners the right to learn the amount of impervious surfaces on properties via a publically accessible means, for regulations to be developed and reviewed by impacted parties, and hopefully a shared vision of what is needed, regionally, to most efficiently and reasonably deal with the challenges of stormwater. Most importantly, this time will allow the state and its jurisdictions to have a better understanding of how best to reduce impacts of stormwater runoff without individual jurisdictions wasting precious resources by hastily formulating stormwater remediation programs and fees.

A final example of the confusion and disparity that exists is this. The Navy Marine Corps Stadium in Annapolis is owned by the Naval Academy Athletic Association, a non-profit organization and therefore subject to the impervious surfaces fee being considered by Anne Arundel County. Because it is in the municipality, exempted from HB 987 and able to establish its own fee, the Association would pay $500 annually, as Annapolis’ charge for properties with 10,000 square feet or more of impervious surface is a flat fee of $500. Move that same stadium into Anne Arundel County, and the fee would approach $40,000.

Let’s not be impervious to transparency and to reason. We need to rethink the elements and impacts of this economic game-changer. Please, delay the mandate deadline for one year, to July 1, 2014.

H. Walter Townshend is President & CEO of the Baltimore Washington Corridor Chamber, a regional business association serving corporations, non-profits and institutional members.