Donald Fry -- Maryland’s stormwater fees: a lesson in uneven policy making

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By Donald C. Fry

Proposed stormwater fees being considered by Baltimore City would result in the city having the highest so-called “rain tax” on businesses in the state, according to experts who are following efforts in ten Maryland jurisdictions to implement the fees required by state legislation.

But even outside of Baltimore City, potentially substantial new stormwater fees facing many businesses in the Baltimore region and Maryland’s D.C. suburbs offer a compelling lesson in how not to make public policy.

State lawmakers passed enabling legislation during the 2012 General Assembly session in order to comply with new U.S. Environmental Protection Agency standards issued to reduce pollution in the Chesapeake Bay from stormwater runoff.

Little attention was paid to the General Assembly’s enabling fee legislation at the time it was passed last year by votes of 91-45 in the House of Delegates and 33-14 in the Senate of Maryland. It was passed to require county governments in the Baltimore region and in Charles, Frederick, Montgomery and Prince George’s counties to raise revenue to fund the incremental costs of capital improvements needed in order to comply with EPA regulations. The counties were mandated to enact the fees prior to July 1, 2013.

Now that Baltimore City and the affected Maryland counties are engaged in the process of establishing the amount of the local stormwater runoff fees, everyone is paying attention, especially homeowners and businesses.

Enacted or proposed fees for residential properties vary moderately from jurisdiction to jurisdiction. But the widest variation – and potentially the most debilitating fees – will impact businesses, for which fees are based on the amount of impervious surfaces – roofs, driveways, parking lots, macadam or packed gravel – on their properties.

For example, the proposed annual fees for homes in Baltimore City range from $48 to $144, depending on the size of the house. This is comparable to most of the fees for residential properties being enacted around the state. But businesses in Baltimore City face a proposed annual stormwater fee of $2,987 per acre – more than twice the fees to be imposed on businesses anywhere else in the Baltimore region and $1,300 per acre more than Montgomery County’s fee, which is second-highest.

The Baltimore City Council’s Judiciary and Legislative Investigations Committee has scheduled a June 4 work session on the stormwater fee legislation.

Enacted annual per-acre stormwater fees for impervious business property elsewhere in the Baltimore metropolitan area are $1,513 in Baltimore County, $1,307 in Howard County, and $610 in Harford County.

Anne Arundel’s County Council passed a fee for businesses of $1,322 per acre. The legislation was initially vetoed by the county executive and the veto was subsequently overridden by the County Council. The Council has since passed a lower cap on non-residential fees of 25 percent of their real property taxes and also approved a three-year phase in for fee bills over $500.

Carroll County’s fee proposals are pending. Elsewhere, the Frederick County commissioners directed their staff to develop a fee of 1-cent per business parcel. Charles County proposes a $428 per-acre annual fee for business property and fees have yet to be proposed in Prince George’s county.

Though there is major variation in proposed fee rates, in most of the impacted Maryland jurisdictions there is potential for dramatically high fees to be imposed on companies that occupy large sites. “Are you ready for the biggest business tax increase you’ve ever seen?” asked a recent email alert the Maryland Motor Truck Association sent to its members.

One of the organization’s members in Baltimore City would pay $300,000 per year in new business fees under the City’s proposed stormwater fee rates, the email alert reported.

The proposed new “surprise” stormwater runoff fees are not unique to Maryland. They are being enacted not just here, but in many U.S. states, metropolitan counties and cities that are near bodies of water – such as the Chesapeake Bay – into which flow large amounts of polluted stormwater from impervious surfaces.

And Maryland isn’t the only place where such fees have prompted less than positive reactions, including a few lawsuits elsewhere.

A St. Louis court recently ruled in favor of plaintiffs that argued that the stormwater fee was actually a tax and, therefore, subject to approval by voters. That ruling was subsequently upheld by a state appellate court and was scheduled to be heard May 21 by Missouri’s highest court.

In the Denver area, bills sent to Adams County residents for stormwater fees that took effect on January 1 were found to have a 34 percent error rate, further inflaming residents who say they are organizing a class-action lawsuit contending that the new fee is, in fact, an illegal tax.

A federal district court in Virginia ruled in January that stormwater, in and of itself, is not a pollutant and therefore is not something whose flow can be restricted by the EPA. This is a very narrow ruling that most likely doesn’t apply to Maryland.

Virtually no one opposes taking appropriate strides to clean our nation’s waterways. However, a major private-sector concern is that the heaping on of an additional fee only adds to the cost of doing business.

In Maryland, the process of implementing stormwater fees has made one thing clear. It demonstrates how federal bureaucrats and state lawmakers, virtually without anyone paying close attention, put into place a well-meaning policy that will submit homeowners to new “surprise” fees and will dramatically increase overhead for many businesses in Baltimore City and in much of our state.

What’s more, the uneven fashion in which the policy is being applied will create among jurisdictions instant competitive disadvantages that didn’t exist a year ago.

From the standpoint of Maryland’s private sector, the stormwater fee policy as currently constructed runs directly contrary to four of the eight core pillars for business growth and job creation that were developed by the state’s business leaders and economic development experts and compiled by the Greater Baltimore Committee in its report, “Gaining a Competitive Edge.”

The fee policy is not an example of government partnering with business.

It is not streamlined, stable and predictable regulatory policy making.
It does not create a fair and competitive fee or tax structure.

And it, most certainly, does not steer clear of arbitrarily or disproportionately imposing additional overhead on the business sector.

Surely government in our nation and state can do better.

Our bureaucrats and lawmakers could start with better cost analysis and more thoughtful approaches beyond simple number crunching when enacting policies with wide-ranging impacts on business and quality of life.

Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

Recent Center Maryland columns by Donald C. Fry:

Council should opt for ‘win-win’ approach, not ‘magic bullet’ for local hiring effort

Closing the ‘disconnect’ with elected officials over competitiveness

City takes constructive step toward strategy for job growth

Federal fiscal uncertainty could erode states’ infrastructure funding options

Business issues rose to the top of State House priority lists in 2013 session

O’Malley deserves better grade for affordable college in Maryland
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Donald C. Fry has been the president and CEO of the Greater Baltimore Committee (GBC), the central Maryland region's most prominent organization of business and civic leaders, since November 2002.

Under Don’s leadership, the GBC is recognized as a knowledgeable and highly credible business voice in the Baltimore region, Annapolis and Washington, D.C. on policy issues and competitive challenges facing Maryland. Its mission is to apply private-sector leadership to strengthening the business climate and quality of life in the region and state.

Fry served as GBC executive vice president from 1999 to 2002. From 1980 to 1999 Fry was engaged in a private law practice in Harford County. During this time he also served in the Maryland General Assembly. He is one of only a handful of legislators to have served on each of the major budget committees of the General Assembly.

Serving in the Senate of Maryland from 1997 to 1998, Fry was a member of the Budget and Taxation Committee. As a member of the House of Delegates from 1991 to 1997 Fry served on the Ways and Means Committee and on the Appropriations Committee.

Fry is a 1979 graduate of the University of Baltimore School of Law. He earned a B.S. in political science from Frostburg State College.