Fees, taxes, surcharges and other sources of confusion in Baltimore County.

I’ve used the expression “time for the gloves to come off” a lot recently. Maybe it’s just me, but it seems that the time for equivocating on any number of political issues confronting us on the local, state and national levels has passed.

Of all such issues, the debate in Baltimore County between the “development impact surcharge” proposed by County Executive Johnny Olszewski (Bill No. 23-19) and the “development impact fee” proposed by Councilman David Marks (Bill No. 16-19) is a small one indeed. Nevertheless, it is important enough to the county to make the following point, and to do so without equivocation:

It would be absolutely foolish for any county, if it had the option, to impose a development impact fee rather than a development excise tax. Spend the money on needed infrastructure, not on lawyers and economists.

(The “development impact surcharge” proposed by Bill No. 23-19 is, under state law, a development excise tax. My educated guess is that the bill refers to it as a “surcharge” because it is an easier word for politicians to get past their lips than “tax.”)

Anne Arundel County had a development impact fee rather than a development excise tax while I worked in the Anne Arundel County Office of Law; the county didn’t have the legal authority to impose a development excise tax. Long story short, while the “rational nexus” principles governing the fee approach sound fine in theory, in practice they are little more than a significant administrative burden and expense that contribute nothing to the general welfare of the county. The fee approach does guarantee plenty of work for lawyers and economists – i.e., transactional costs that provide no benefit to residents.

I, and others familiar with local government law, contribute to the confusion between development impact fees and development excise taxes by occasionally referring to both generically as “impact fees.” In any event, here is a brief explanation of the differences by the General Assembly’s Department of Legislative Services:

Differences Between Impact Fee and Excise Tax

A development impact fee is a regulatory measure designed to fund facilities specifically required by new development projects in order to mitigate the impact of such development on infrastructure or public facilities. However, there must be a reasonable connection between the amount of the impact fee imposed and the actual cost of providing facilities to the properties assessed. In order to justify the imposition of an impact fee, a jurisdiction must conduct a study that measures the effects that new development will have on public facilities. The amount of an impact fee is subject to judicial review. Moreover, the revenue from the fee must be dedicated to substantially benefit the assessed properties. Thus, a county cannot collect an impact fee in one geographic area and spend the funds in another area. [Emphasis added.]

A building excise tax is another means of raising revenue from new development. Unlike a regulatory impact fee, the amount of an excise tax does not have to be closely related to the actual cost of providing public facilities to serve new development. In addition, excise tax revenues do not have to be spent to specifically benefit the properties that are taxed but can generally be spent throughout the county.

As it happens, Baltimore County has the authority to adopt a development excise tax under § 11-1-102(a) of the County Code, which was enacted by the General Assembly as Chapter 769 of the 1953 Laws of Maryland. In a case called Waters Landing v. Montgomery County, 337 Md. 15 (1994), the Maryland Court of Appeals held that Montgomery County could use similar authority to impose an excise tax on development. As I recall, Montgomery County and Baltimore County are the only two counties to which the General Assembly has delegated this general taxing power.

Here is a general observation:  Better to give the county executive and county council the flexibility to impose the tax and spend the revenues as they deem appropriate through the budget process, and hold them accountable for their actions, rather than try to micromanage the results through laws and regulations. For one thing, the latter approach doesn’t work very well, and, for another, it furnishes plenty of grist for the litigation mill. Baltimore County already spends an inordinate amount of money on litigation that, with a little foresight, could have been avoided.

Over the years, I have become a firm devotee of the KISS principle. Elected officials, sometimes in the sincere belief that they are “fine tuning” the law, instead make things too complex. Government becomes byzantine, balkanized, and ultimately FUBAR when the KISS principle is ignored.

If Baltimore County had imposed a development excise tax (or impact fee) 25 years ago, it would have avoided the present need for an increase in the local income tax. In that sense, Bill No. 23-19 (development excise tax) is many days and many dollars short, although better late than never. Nor does Bill No. 16-19 (development impact fee) come close to making up for current revenue shortfalls, but it would add needless costs to administering the expenditure of the revenues that Bill No. 23-19 would not.

[My commentary on the suggestion by Mr. Marks that his development impact fee bill is a substitute for the increase in the county income tax rate proposed by Mr. Olszewski will be for another time. Suffice it to say that when he votes on the county budget next month his vote likely will be the pivotal one. And when Mr. Marks votes, we’ll know whether he is more concerned about his own political future than the future of the county. He’s been a part of the problem in the past; this may be his last best chance to become part of the solution.]

Olszewski Just Might Be the Leader to Turn Baltimore County Around

Before Baltimore County Executive Johnny Olszewski Jr. announced the proposed county budget for the next fiscal year, I had my doubts what kind of county executive he was going to be. I was worried that he would be an amicable play-it-safe politician with one eye on the governor’s mansion rather than a genuine leader intent on turning around a county showing serious signs of decay.

The budget includes a 37-cent increase in the local income rate, the addition of a development impact fee and small increases in other taxes. It demonstrates that Mr. Olszewski has the political courage to increase revenues to back up his campaign promises to preserve the quality of public facilities and services, especially schools. And that’s a big deal, especially in Baltimore County. Good for you, Johnny O.

There has been no increase in the county property tax rate since 1988 and in the local income tax rate since 1992. Without an increase in at least one of the rates the county faces a grim financial future. It already has begun the descent into mediocrity.

Make no mistake about it, Mr. Olszewski inherited a financial crisis. The county’s current revenue stream is inadequate to repair or replace aging and deteriorating infrastructure and to meet unfunded liabilities. Early last year the county’s own Spending Affordability Committee warned that the storm clouds already had gathered.

Committee members criticized the late county executive Kevin Kamenetz for failing to put together a long-term plan for funding needed capital improvements, retiree health care, and upgrades to the county’s sewer system necessary to comply with a federal consent decree. I share the cynical view that the absence of such a plan was deliberate, to try to obscure from voters the unsustainable path that the county was on. And, to be perfectly blunt, waiting until Mr. Kamenetz was at the end of his eight-year tenure in office to sound the alarm said little about the bravery of committee members.

Collapse of the Ponzi scheme

For years, the county relied on new development to generate additional property tax revenue. Unlike comparable counties, however, Baltimore County lacks a development impact fee imposed on new construction to offset the costs of expanding the capacity of infrastructure such as schools, roads, and water and wastewater facilities to handle the demands of the new construction. Consequently, general tax revenues are used to pay for the expansion.

That leaves less money for other purposes, including routine repair and replacement of existing facilities. The result is a fiscal Ponzi scheme. That scheme, which strongly favored builders and developers, is now collapsing and the full weight of paying for unmet needs will fall on ordinary taxpayers.

Digging out of a deep hole

Financial crises tend to compound themselves for both individuals and governments. As the county approaches the limit on money that it may borrow to pay for capital improvements, it faces a potential downgrade of its bond rating as concerns grow about its creditworthiness.

A reduction in bond rating means that the county would have to pay more interest to lenders. That increases the costs to the county of borrowing money and means fewer capital projects. To avoid that, the county must rely more heavily on “pay-go” financing; in other words, paying for improvements from current revenues. As of now, the revenue to do that is not there.

There was never a chance that Mr. Olszewski would find enough money by scrubbing the county budget for possible savings. Former county administrative officer Fred Homan was a master at robbing Peter to pay Paul within the county budget. Many county services have been cut to the bone, and maintenance and other expenses already deferred far too long.

County public schools are vulnerable. Middling teacher salaries and overcrowded classrooms in deteriorating buildings eventually will trigger an educational death spiral in which talented teachers and principals leave for greener pastures.

In December, Mr. Homan appeared at his last meeting of the Baltimore County Council after serving 29 years first as the county’s budget chief and then as county administrative officer. He warned council members about the financial difficulties ahead.

“What you face now going forward is going to make a very significant difference in not only the fiscal situation of the county, but the lives of citizens of the county,” Homan said. “I wish you the best.”

Gee, Mr. Homan, thanks a lot.

The least painful way to proceed

Increasing the local income tax rate is the least painful way to proceed. Increasing the local income tax rate has little if any effect on low-income residents, including seniors on fixed incomes who own their own homes. Instead, it shifts the burden of a tax increase to wage-earners more likely to have children in the public schools. That’s only fair, because spending on education consumes about 51 percent of the county’s operating budget.

County citizens share some of the blame

A succession of Baltimore County politicians mortgaged the future of the county to protect their own political ambitions. While county executives like Mr. Kamenetz bear most of the blame, the shortsightedness of an electorate with an anti-tax sentiment approaching religious fervor has been a big part of the problem. Those citizens can take the short ride into the city if they want to see what happens when a jurisdiction allows infrastructure to degrade too far.

The choices about the way forward are stark, with the trajectory of the county’s financial health and quality of life trending sharply downward. At least we now know that Mr. Olszewski has the guts to try to dig Baltimore County out of the hole dug by his predecessors.

The ball is now in the court of the county council. How many profiles in courage will we find there?

[Published as guest commentary by Maryland Matters on April 16, 2019 but not posted to my blog until December 18, 2019. The date of posting that appears above was backdated to place all posts in the order in which they were written.]

Police union has stranglehold on some city politicians

A small but important drama escaped notice because of the hubbub surrounding Baltimore Mayor Catherine Pugh’s “Healthy Holly” book deals. Two days after the deals first made the news, newly appointed Baltimore Police Commissioner Michael Harrison traveled to Annapolis in a last-ditch and ultimately successful effort to persuade members of the Baltimore’s delegation to the Maryland General Assembly not to approve House Bill 1251.

HB 1251 was introduced at the request of the union that represents BPD officers in the ranks of lieutenant and below, Lodge 3 of the Fraternal Order of Police. The bill attracted little attention despite the fact that it would have hindered compliance with the consent decree between the BPD and the United States Department of Justice.

The most astonishing part of the bill was that it was co-sponsored by six members of the city delegation. It is beyond me why six delegates from the city believed that it was a good idea to make reform of the BPD harder than it already is.

In 2016, an Editorial Advisory Board opinion in this newspaper lamented that the BPD could not be reformed unless someone managed to “dismantle the police union’s grip on city government.” Extend that statement to include the union’s grip on members of the General Assembly from the city and that statement is as true now as it was then.

Law and the consent decree

Under current law, the only terms and conditions of employment that may be submitted to binding arbitration, if the city and FOP fail to agree on them, involve “direct compensation” (salaries, shift differential pay, etc.). Also, the Baltimore City Council may exclude from collective bargaining terms and conditions of employment, other than those involving direct compensation, that the council believes should be left to the sole discretion of the police commissioner.

HB 1251 would have given the FOP the right to submit all terms and conditions of employment to binding arbitration and stripped the city council of the power to limit the scope of collective bargaining. The terms and conditions subject to arbitration under the bill were those now expressly excluded from binding arbitration, including job security, disciplinary procedures, investigations, promotions, scheduling, and eligibility for and assignment to details and positions.

In other words, an extraordinary amount of control over the BPD would have been transferred from the police commissioner to a panel of three independent labor arbitrators with no particular expertise in running police departments. It also would have given BPD officers collective bargaining rights beyond the reach of the consent decree and the court.

The consent decree provides that it “does not alter or affect current CBAs [collective bargaining agreements] or collective bargaining rights, or state law.” In the event that a provision of a CBA impedes implementation of the decree, the decree states that the “city and BPD will use its best efforts to advocate to change the … collective bargaining provision.”

The decree provides, however, that “if the City and BPD are unable to eliminate conflicts between the provisions of this Agreement and law(s), ordinance(s), or collecting bargaining provision(s),” they need only comply with the provisions of the decree “to the extent permissible.” Consequently, labor arbitrators accountable to no one for their decisions would have been given the power to block reforms involving disciplinary procedures, investigations, promotions, assignments, etc.

Defeating the bill

Led by City Solicitor Andre Davis, the city waged an intense campaign against the bill. Harrison was dispatched to Annapolis on March 15 in one final effort to defeat the bill. The bill was never brought to a vote and died in committee, largely because of Harrison’s testimony.

Harrison’s testimony apparently marked the end of his brief honeymoon with the FOP, which tweeted: “PC Harrison chose to testify against our proposed legislation at a time that his support of our membership is greatly needed.” The FOP was unhappy with Harrison, but it was furious with Mr. Davis. On April 3, the FOP sent a blistering “open letter” to Davis.

The letter blamed Davis for sending Harrison to Annapolis to kill a bill that was before the General Assembly this year, HB 1251: “The Police Commissioner, with the blessing of both you and Mayor, testified in opposition to [HB 1251], causing the City Delegation to forego a vote which would have gone in favor of the FOP.”

And the worst part is that I believe the union is correct: But for Harrison’s pleas, the city delegation would have passed a bill intended, at least in part, to stymie reform of the BPD. HB 1251 was a testament to the continuing stranglehold that the FOP has on certain city politicians and how close the city can come to grief when the public is not paying attention.

[Published as guest commentary by the Daily Record on April 11, 2019 but not posted to my blog until December 18, 2019. The date of posting that appears above was backdated to place all posts in the order in which they were written.]

Did Baltimore’s top prosecutor lie under oath?

It has been two weeks since a serious allegation was made that Baltimore State’s Attorney Marilyn Mosby gave false testimony under oath. No elected official has stepped forward to suggest that the allegation should be investigated as possible perjury. Why not? Maybe it’s the preoccupation with the “Healthy Holly” book scandal. Or maybe it’s something else.

On March 20th, Syeetah Hampton-El was called to the witness stand in a civil trial in which Ms. Mosby was a defendant. Ms. Hampton-El is an administrative law judge and former city prosecutor. She testified that Ms. Mosby made a “throat-slitting gesture” toward her at an Alliance of Black Women Attorneys banquet in 2014 because Ms. Hampton-El supported Ms. Mosby’s opponent in the 2014 Democratic primary, incumbent state’s attorney Gregg Bernstein.

On March 21st, Ms. Mosby testified that she recalled attending the banquet but strenuously denied the allegation by Ms. Hampton-El, stating that it was “absurd that anybody would suggest I would have made a throat-slitting gesture at a forum with 200 people.” Ms. Mosby added that “Syeetah Hampton-El has always had an issue with me.”

On March 22nd, Michelle Wilson, an assistant attorney general and another former city prosecutor, went on Facebook to corroborate Ms. Hampton-El’s account. Ms. Wilson wrote that she was seated at the banquet with Ms. Hampton-El. “I was facing the dais when [Ms. Mosby] made the throat-slitting gesture but the reaction at my table was immediate. Those facing her immediately commented and I was right across from Syeetah [Hampton-El] and could see her face and reaction.”

Ms. Wilson also posted that, at the end of the event, another assistant state’s attorney texted Ms. Mosby about the alleged incident. Ms. Wilson wrote that Ms. Mosby responded with words to the effect “that bitch [Ms. Hampton-El] is gone.”

The trial at which the testimony occurred was the result of the claim by former city assistant state’s attorney Keri Borzilleri that she was unlawfully fired by Ms. Mosby because of her support of Mr. Bernstein. Ms. Borzilleri’s lawyer argued that the throat-slitting gesture was evidence of Ms. Mosby’s inclination to retaliate against lawyers in her office who supported her opponent.

Although employees in the office serve at-will, they may not be terminated for exercising their constitutional right to campaign for candidates of their choosing. Ms. Mosby stated that Ms. Borzilleri was let go because she lacked empathy for crime victims.

The jury found in Ms. Mosby’s favor. The verdict says nothing, however, about who was telling the truth about the alleged throat-slitting gesture. It is possible that the jury believed Ms. Mosby’s denial. It also is possible that the jury discounted the significance of the alleged gesture to the case.

This much is certain, however: Lying has brought the criminal justice system in the Baltimore to its knees. Lying is what enables all other types of corruption to flourish.

The judicial system depends upon truth-telling to function properly in both criminal and civil cases. Witnesses testify under oath and may be prosecuted for perjury if they lie.

The system ultimately will be destroyed if the obligation to testify truthfully is not enforced. To ignore an allegation of perjury against a sitting state’s attorney would send a terrible message in a city that already has a reputation for two standards of justice, with one standard for the powerful and another for the powerless.

The jurisdiction of the state prosecutor over the allegations is doubtful because it extends to perjury by public officials only if the perjury is committed in the course of another crime within the state prosecutor’s jurisdiction. The attorney general can investigate if directed to do so by the governor or General Assembly. And if the governor has not already done so he should order the attorney general to begin an investigation immediately.

If the investigation exonerates Ms. Mosby, fine. According to Ms. Wilson, there were other witnesses at the table at which she and Ms. Hampton-El were seated. If those witnesses didn’t see what happened, it will remain Ms. Hampton-El’s word against Ms. Mosby’s, and that likely will be the end of it.

Ms. Mosby should welcome an investigation in the interests of removing any cloud over her office. Ms. Mosby has made it abundantly clear that special treatment has no place in the criminal justice system, and that her office will not treat police officers as if they are above the law. She can set an example by insisting that the same principle be applied to her.

[Published as an op ed by the Baltimore Sun on April 4, 2019 but not posted to my blog until December 18, 2019. The date of posting that appears above was backdated to place all posts in the order in which they were written.]