A conflict of interest in Baltimore County

Regulating land use and development is one of the most important functions of Baltimore County government. The County Council makes decisions directly affecting the fortunes of land developers, builders and contractors. Anirban Basu is the chairman and CEO of Sage Policy Group, which on its website touts his consulting work on behalf of “prominent developers” and lists him as the chief economist to Associated Builders and Contractors, a national construction industry trade association.

Is it any wonder county residents urged the council to not renew its longstanding contract with Sage to provide it with economic forecasts? A better question is why council members, who regulate developers, didn’t themselves recognize the conflict of interest in relying on advice from an industry ally.

Mr. Basu raised eyebrows by appearing in Facebook videos this spring opposing various revenue-increasing measures under consideration by the council, including the imposition of impact fees on new construction. Impact fees defray the costs of expanding public facilities to accommodate increased demands placed on the facilities by new construction. They are not, however, popular with the builders and developers who pay them.

In May, Sage issued a report commissioned by the Maryland Building Industry Association concluding that impact fees would slow migration into the county and accelerate the loss of tax base. Sage issued a similar report in 2005.

The administration of the late county executive Kevin Kamenetz used a study done by Sage in 2017 to justify the controversial $43 million in financial assistance awarded to the developers of Towson Row, a five-acre mixed-use development. Sage’s theme seems to be that giving tax credits to builders and developers is good; making them pay impact fees is bad.

It is a message that rankled ordinary taxpayers subject next year to a 13% increase in the county income tax intended to help close an $81 million budget gap. Adding insult to injury, that shortfall can be attributed to the cumulative effect of the absence of impact fees over time.

So, it is easy to understand why citizens were upset that the council wanted to renew its contract with Sage. Although the council stated that it would solicit competing proposals before selecting its economic consultant, it did not rule out selecting Sage.

But why would the council even consider doing so? In my opinion, the answer is that most members of the Baltimore County Council have never fully accepted the responsibilities attendant to belonging to a regulatory body, including maintaining an arms-length relationship with the persons whom they regulate.

The problem starts with council members heavily dependent on political campaign contributions from developers, builders and their lawyers. This has been an historical source of concern by citizens, particularly because members of the Baltimore County Council wield unusually strong power over zoning and development decisions.

The quadrennial comprehensive zoning process that begins next month is an example of that power. Every zoning change made during comprehensive zoning, including changes applying only to a single lot, must be approved by a separate vote of the council.

Moreover, each lot owner that requests a change in zoning during comprehensive zoning has the right to have the request voted upon by the council. A change in zoning to a piece of property can result in an enormous financial windfall to a developer with a contract to purchase the property contingent on the zoning change. In the 2016 comprehensive zoning the council made 516 separate zoning decisions, almost all involving financial winners and losers.

The extraordinary role of the Baltimore County Council in land use and development is not limited to zoning. A developer seeking approval of a “planned unit development (PUD),” which affords more flexibility than permitted by the underlying zoning and potentially involves more profit, first must get the blessing of the county council.

The contract with Sage stoked fears that the council is still too closely aligned with the special interests it is charged with regulating. And that citizens’ interests will continue to come in a distant second.

It does not impugn the integrity of Sage or Mr. Basu to suggest that the council should award the contract to a consultant less closely associated than Sage with the development and construction industries. It might even restore a measure of public confidence in the council.

[Published as an op ed by the Baltimore Sun on July 29, 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.]

The Impact Fee Study That Never Was, Part II

Call this the sequel to my post captioned “The Impact Fee Study That Never Was.” That post described how the Baltimore County Council made a serious mistake during the enactment of Bill No. 16-19 by creating a discrepancy between the bill as enacted and the legal prerequisites for enacting the bill described in the official explanations of both the bill and its state enabling act.

The Fiscal and Policy Note prepared by the General Assembly’s Department of Legislative Services and the Fiscal Note prepared by the Baltimore County auditor stated that the council had to conduct an impact fee study before imposing an impact fee. Nevertheless, Bill No. 16-19 was passed without an impact fee study being done.

The council made things unnecessarily complicated because of its apparent ignorance of a change in the law.

This post deals with related issues, the first of which is what appears to be the motivation for both Bill No. 16-19 and its state enabling act, Chapter 657 of the 2019 Laws of Maryland. In my first post, I quoted Councilman David Marks’ statement of his understanding of the inherent difference between development impact fees and development excise taxes:

“Impact fees are different than excise taxes in that revenue must be spent in a localized manner — in other words, money collected from a development must be used for schools, roads, and infrastructure near the affected community. Money from an excise tax can be spent anywhere.”

He went on to explain the reason for his decision to eschew the county’s longstanding authority to adopt a development excise tax in favor of his bill enacting a development impact “fee” as follows:

“Mr. Olszewski has shown himself to be a thoughtful and collaborative leader, but there is a historical mistrust in Baltimore County, and not just between communities and developers as Mr. Plymyer asserts. There is real fear that a partisan county executive will use his or her power to reward loyal communities or punish adversaries. That is exactly why my legislation requiring localized spending of impact fee revenue is better.” [Emphasis added.]

I explained in my first post how Mr. Marks appeared to fail to understand how a 2018 decision by the Court of Appeals, Dabbs v. Anne Arundel County, had changed the law regarding impact fees. As a consequence of that change in the law, if all that Mr. Marks wanted to do was restrict the use of school impact funds to the school district from which they were collected, he could have done that by a simple amendment to the development excise tax bill introduced at the request of the county executive, Bill No. 23-19.

Going the route of an amendment to Bill No. 23-19 would have eliminated the need for the General Assembly to enact Chapter 657 of the 2019 Laws of Maryland and for the council to enact Bill No. 16-19. More importantly, it would have avoided the legal mess caused by the apparent confusion over the need for an impact fee study. 

There is a better way to deal with the council’s fear of the county executive.

If the motivation for Bill No. 16-19 was indeed fear of the power of the county executive over the Board of Education budget, then isn’t it better to address the power imbalance directly, rather than to make a hash of a major piece of legislation? Here is what I am talking about:

The Baltimore County Council is the only county council in Maryland that lacks the power to restore any denial or reduction made by a county executive in the budget submitted by the local board of education. (The Baltimore City Council also lacks the power to do so.) Under § 5-102(c) of the Education Article of the State Code, the power to restore any denial or reduction made by the county executive in the budget submitted by the BOE will be given to the council if approved by the voters of the county as a charter amendment.

Council members, why don’t you pass a resolution putting that measure on the ballot in 2020? Let the voters decide. If the voters approve the charter amendment, then the council rather than the county executive would have the final say on which capital projects proposed by the BOE get funded. If the voters reject the amendment, then the voters have told you that they trust the county executive over you, and you just live with that fact and stop passing screwed-up bills like Bill No. 16-19.

There is another interpretative issue arising from the absence of an impact fee study.

In my first post I explained how the failure by the council to do an impact fee study despite both the Fiscal and Policy Note prepared by the General Assembly’s Department of Legislative Services and the Fiscal Note prepared by the county auditor stating that one was required created a legal ambiguity. There is an additional issue arising from that ambiguity that I did not mention.

One of the shortcomings of “traditional” (pre-Dabbs) school impact fees is that they can be used only for schools directly affected by the new residential development, and then only for adding or expanding school capacity – they cannot be used for remedying existing deficiencies, such as remodeling or maintenance. This means that the impact fee revenues can sit unused for years if collected in a school district in which no capital projects to add or expand student capacity are needed, even if the overall impact of new residential development in the county has created the need for adding or expanding capacity elsewhere.

One of the issues to be sorted out by the county in light of the ambiguity created by Bill No. 16-19 is whether it was the council’s intent, despite Dabbs, to limit expenditure of the fees to projects that add or expand school capacity. Again, there is plenty of evidence to suggest that it was. That includes the council’s preamble to the bill, in which it states that:

“Development impact fees have been imposed in other jurisdictions in Maryland that pay for additional or expanded . . . public school and public safety facilities, and debt service on bonds issued for additional or expanded infrastructure and facilities.” [Emphasis added.]

Is the County going to argue that, despite the language in the preamble, it can use impact fee revenues for routine maintenance and remodeling? That is another area of confusion that could and should have been avoided.

CONCLUSION

There’s no good explanation for what the council did. If the Fiscal and Policy Note prepared by the General Assembly’s Department of Legislative Services and the Fiscal Note prepared by the county auditor were correct, and the council intended to impose an impact fee bound by the rational nexus standard, then an impact fee study should have been done before passing Bill No. 16-19.

If, on the other hand, the Department of Legislative Services and the county auditor simply were unaware of the Dabbs case and made a mistake about the requirement for an impact fee story, the council should not have passed Bill No. 16-19 before asking the auditor to issue a revised note eliminating her statement that an impact fee study was required. It would be an unacceptable level of sloppiness for the council to knowingly pass a bill that was inconsistent with the legal prerequisites as stated in the legislative record.

Of course, if the county auditor (and county council) were unaware of the Dabbs decision, that raises another question. The Dabbs decision was issued on April 10, 2018. The county auditor issued her report on Bill No. 16-19 on May 23, 2019. By then, one would assume that the county attorney, or someone, was aware of Dabbs and would have brought it to her attention. And if not, why not?

This situation has all the earmarks of “haste makes waste” and the failure to apply sufficient time and expertise to a major piece of legislation. And that is never a good excuse.

The Impact Fee Study That Never Was

Baltimore County Councilman David Marks introduced Baltimore County Council Bill 16-19, which imposed a development excise tax on new non-residential construction and a development impact fee on new residential construction. The purpose of both is to help defray the costs of expanding public facilities to accommodate the demands of new construction.

I wrote an opinion piece criticizing the bill. Mr. Marks responded with his own commentary, describing mine as “predictably negative.”

Mr. Marks said something striking in his commentary that led me to conclude that perhaps I had not been negative enough. In response to my criticism, Mr. Marks touted his 1997 master’s thesis on impact fees and explained the reason that he wanted an impact fee rather than an excise tax applied to new residential construction as follows:

“Impact fees are different than excise taxes in that revenue must be spent in a localized manner — in other words, money collected from a development must be used for schools, roads, and infrastructure near the affected community. Money from an excise tax can be spent anywhere.”

Dabbs v. Anne Arundel County (2018)

Actually, development impact fees are not inherently different from development excise taxes. What was true in 1997 when Mr. Marks wrote his thesis no longer is true in 2019.

A 2018 case decided by the Maryland Court of Appeals, Dabbs v. Anne Arundel County, held that impact fees need not satisfy the so-called “rational nexus” (also referred to as the “rough proportionality”) test to be constitutionally sound. Therefore, under the constitution, impact fees generally applicable to specified types of new construction are indistinguishable from development excise taxes in that they “can be spent anywhere,” to paraphrase Mr. Marks.

Although the rational nexus requirement is not constitutionally mandated, the General Assembly is free to impose it on a jurisdiction as part of an enabling act. Under the rational nexus model, there be a reasonable relationship between the public facilities on which the fees are spent and the new construction on which the fees are imposed. There must also be a reasonable relationship between the amount of the fees and the fiscal impact of the new construction on public facilities.

Notwithstanding Dabbs, it appears from his commentary that Mr. Marks intended the impact fee adopted by Bill 16-19 to be based on the “traditional” (pre-Dabbs) model. In other words, subject to rational nexus requirements. Among those requirements is a formal impact fee study that must be done before the fee scheduled can be established.

An impact fee study is a substantial undertaking that follows what is now a widely accepted methodology.  Here is a link to a recent impact fee study done by Frederick County:                                    https://www.frederickcountymd.gov/DocumentCenter/View/302741/0213—2017-Impact-Fee-Study?bidId

What happened to the impact fee study?

The requirement for an impact fee study was described in the Fiscal Note to Bill 16-19 prepared by Baltimore County Auditor Lauren Smelkinson as follows:

“[T]here must be a reasonable connection, or nexus, between the amount of the impact fee imposed and the actual cost of providing facilities to the properties assessed. The projects and services funded by impact fees typically include public school construction, libraries, community colleges, transportation, public safety, parks and recreation, and water/sewer utilities. . . In order to justify the imposition of a development impact fee, a jurisdiction must conduct a study that measures the effects that new development will have on public facilities.” [Emphasis added.]

The county auditor did not make up that description from whole cloth. She took it directly from the legislative history of the enabling act for Bill 16-19, which was Chapter 657 of the 2019 Laws of Maryland, enacted into law as HB 449. It is worth noting that Baltimore County has had the authority to enact a development excise tax since 1953. The explicit authority to impose an “impact fee,” however, is new.

The Fiscal and Policy Note prepared for HB 449 by the General Assembly’s Department of Legislative Services contains the same language as the Fiscal Note for Bill 16-19:

“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.”

And therein lies the rub: Despite the description of the requirement by both the Department of Legislative Services and the county auditor, no impact fee study was done by the county council before the impact fee schedule in Bill 16-19 was adopted.

Now what?

The consequences of the council’s failure to do an impact fee study are uncertain. One consequence could be a legal challenge to the fee schedule based on the absence of an impact fee study justifying the fees.

The requirement for an impact fee study is not expressly stated in Chapter 657 of the 2019 Laws of Maryland. Then again, the requirement was not included in impact fee enabling acts before Dabbs. It was implied under the constitution.

Is the requirement for an impact fee study implied in Chapter 657 and in Bill 16-19? The most authoritative accounts of the legislative intent of the General Assembly and Baltimore County Council seem to think so. Also, in the preamble to Bill 16-19 the council itself states that the purpose of impact fees is “to provide funds for various public facilities proportionate to development.” That’s rational nexus, impact fee study language.

Thus, an argument can be made that the Department of Legislative Services and county auditor were correct, and that the General Assembly and County Council wanted the constraints of the rational nexus test to apply to the fee. That argument is made more persuasive because the county already had the authority to adopt a “no constraints” development excise tax.

There was no point in passing Chapter 657 unless the General Assembly intended to create an option for defraying the costs associated with new construction in Baltimore County that differs from the development excise tax option. The rules of statutory construction militate against interpretations that would make a statute redundant.

A competing explanation is that neither the Department of Legislative Services, the County Auditor nor Mr. Marks were aware of Dabbs v. Anne Arundel County when they wrote what they wrote. In other words, the legislative intent as described by the Department of Legislative Services and repeated by the county auditor may simply have been a mistake based on outdated law.

If it was a mistake, it should have been recognized and corrected before Bill 16-19 was passed by the county council. It is never a good idea to have the implementation of a bill directly contradict the requirements of the bill as described by the professionals paid by the legislative body to prepare such descriptions; indeed, it is difficult to overstate how unacceptable such discrepancies are in competently done legislation, given that they are invitations to litigation. 

For all its other shortcomings, Bill 16-19 was an extremely sloppy piece of work. Sorry, Mr. Marks, but the bill deserved my “predictable negativity.” And then some.

An open letter to Jack Young: Open up police brutality settlements to scrutiny

To the Honorable Bernard C. “Jack” Young, Mayor of the City of Baltimore:

I have a proposal that could help you and the city. Your statement last week that you are considering a run for mayor in the 2020 election was met with considerable skepticism. It appears that there are doubts about your leadership abilities that you need to overcome.

Some people scoffed at your claim that you are being encouraged to run because of your performance in office thus far, citing your lackluster handling of the disastrous ransomware attack as well as the water outage calamities at Poe Homes and now on Howard Street.

Given these crises, your declaration last week that “my team and I have weathered the storm and we’ve moved the city forward” rings a bit hollow.

Here is action that you can easily take to move the city forward and kick-start your mayoral campaign:

Instruct your city solicitor not to appeal the decision by the U.S. Court of Appeals for the Fourth Circuit holding that the non-disparagement clauses insisted upon by the city when settling claims of police brutality and other misconduct are unconstitutional.

Buying Silence

Last Thursday, a three-judge panel of the appellate court reversed a lower court ruling and held that the clauses (commonly referred to as “gag orders”) violated the First Amendment.

The majority opinion offered a slashing indictment of the city’s policy of buying the silence of victims of police wrongdoing.

In a tone-deaf response, City Solicitor Andre Davis stated that he intended to appeal the ruling to the full court.

If you end the use of non-disparagement clauses, you will do what your predecessor lacked the wisdom and courage to do.

Former Mayor Catherine Pugh and her administration continued to defend the clauses despite strenuous opposition from a coalition that included 20 media organizations, the ACLU and numerous grassroots groups.

These non-disparagement clauses are a disservice to the public, motivated by the city’s desire to protect the reputation of its police officers. Make a statement acknowledging the obvious: The reputation of the Baltimore Police Department already is in tatters.

If city officials had spent half the time and effort on reforming the department that they spent on trying to hide police misconduct from the public, the department would probably not be in the shape that it is in today.

Action, not Talk

Calling for an end to the non-disparagement clauses will not endear you to the Fraternal Order of Police (FOP), the union representing rank-and-file police officers.

In the past, you have been reluctant to antagonize the FOP. As president of the City Council for nine years, you could have introduced an ordinance banning the non-disparagement clauses. But you didn’t.

You are hardly alone, however, in your reticence to take on the FOP. If you listen to what members of the Maryland General Assembly from Baltimore say, you might believe that they are committed to combating the pervasive mistrust of the police department by making the actions of its officers more transparent and subject to public scrutiny.

But if you watch what they do, you realize that the nothing could be further from the truth. The prime example is the absence of any progress by the General Assembly on allowing reasonable public inspection of police disciplinary records – a failure for which the Baltimore delegation bears a large part of the blame.

Here is an opportunity to set yourself apart from the big-talk, little-action crowd.

City voters are aching for an infusion of fresh ideas and bold leadership. They want their elected officials to get beyond business-as-usual and fix things. Here’s your chance, Mr. Young, to grab the bull by the horns and take a step toward actually solving a problem.

Don’t blow it.

[Published as guest commentary by the Baltimore Brew on July 15, 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.]

CBF and Critical Areas Commission used the Little Island fight to change Maryland law

Let’s make one thing clear about the painfully long history of the house built without permits by Daryl Wagner on Little Dobbins Island in the Magothy River.

The primary reason that it has taken so long to resolve this matter was the refusal by the Maryland Critical Area Commission to recognize and apply settled Maryland law. The commission used the infamous white house with a faux lighthouse as the poster child for its campaign to change state critical area law.

When Wagner built the house in 2002 it was the law in Anne Arundel County (and elsewhere in Maryland) that the owner of a house or other structure built without permits had the right to seek retroactive approval of the house or structure, subject to specified sanctions.

Wagner was no hero for his unlawful actions, but you don’t have to be a hero to enjoy rights under the law.

The Critical Area Commission, supported by the Chesapeake Bay Foundation, engaged in a protracted legal battle to try to deny Wagner his right to seek retroactive approval of the house. In my opinion, they did so for reasons that had nothing to do with the effect of the house on the environment.

If concern for the Magothy River had been the primary goal, they would have encouraged prompt removal of the 3,325 square feet of impervious surface and the 3-to-1 replacement of unlawfully disturbed vegetated buffer required as conditions of the retroactive approval. That environmental remediation still has not occurred, stalled by litigation that began 15 years ago.

I believe that the commission and foundation pursued the litigation to exploit the public’s outrage and create a cause célèbre to promote changes to Maryland critical area law by the General Assembly. It is a motivation that they didn’t deny, and they achieved their goal.

In 2008, the General Assembly enacted comprehensive amendments to the law, greatly expanding the power of the Critical Area Commission. In 2014, Jon Mueller, Chesapeake Bay Foundation vice president for litigation, told The Capital that those amendments might not have happened if the private non-profit organization hadn’t fought approval of Wagner’s house.

He probably was right.

Even its success with the General Assembly in 2008 wasn’t enough for the Critical Area Commission, however. It attempted to use the 2008 changes to divest Wagner of his right to seek retroactive approval of a critical area variance.

It was another piece of litigation destined for futility, because the General Assembly had expressly provided that the changes applied only to critical area violations occurring on or after July 1, 2008.

As recounted in a 2014 story in The Capital, the Critical Area Commission and Chesapeake Bay Foundation lost every legal battle. That didn’t seem to matter, as long as they kept the controversial house in the public eye.

It is possible that they thought that they eventually could wear Wagner down by exhausting his financial capacity to fight back, forcing him to tear down the house. If they thought that, it appears that they were wrong.

The Chesapeake Bay Foundation is a private non-profit organization, but the Critical Area Commission is a state regulatory agency. They are held to different standards.

The 2008 changes to critical area law strengthened protections of the Chesapeake Bay and its tributaries. Did the commission’s strategy of using Wagner’s house as the poster child for its campaign to amend critical area laws justify the pursuit of litigation that it knew or should have known would not succeed?

How you answer that question depends on how you view the proper role of regulatory agencies, and the extent to which you believe that ends may be used to justify means.

As for my view, I believe that regulatory agencies should confine litigation to enforcement of the law and find other ways to achieve legislative goals.

[Published as an op ed by the Annapolis Capital Gazette on July 6, 2018 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.]