Is Harford County’s impact fee a vital source of revenue for public school construction, or an unfair tax that has stymied new home sales?
Harford County Councilman Dion Guthrie (Dist. A) says it’s the latter. Along with co-sponsor Chad Shrodes (Dist. D), Guthrie introduced legislation on September 15th to repeal the county’s impact fee.
Guthrie, who voted against imposing the fee in 2005, said in a phone interview that the impact fee was not generating the revenue that was originally anticipated and it was not stimulating the economy. Guthrie said “It’s time to get rid of it.” He said the revenue lost by repealing the impact fee could be “easily overcome” by the revenues generated from increased economic activity resulting from more homes being built.
The impact fee is a set amount charged to developers to help offset the impact of new homes on the cost of public schools. Harford’s impact fee is currently $8,269 for a single family home, $5,720 for a townhome and $1,637 for other dwellings, including mobile homes. The revenue to local government from the impact fee rises and falls with permit applications in any given year, having generated as much as $4.7 million in FY07 and dropping to a low of about $2.4 million in the fiscal year that just ended in June.
More recently, there’s been a turnaround in permit activity. Harford County Treasurer John Scotten says collections from the impact fee in the first two months of FY10 are up 72% over the same period last year, which could bring collections back up near peak levels. But he says a more conservative revenue estimate for the full year is somewhere between $3.3 million and $3.5 million.
Councilman Guthrie says the impact fee is unfair because it only taxes new home builders to pay for public schools, when families who move to Harford County also buy existing homes. And Guthrie is not shy about who is to blame for the inequity, calling the impact fee “an unfair tax that was sent to us by the delegation”.
In Maryland, local lawmakers must first have enabling legislation approved by the local delegation and passed by the Maryland General Assembly before they can impose a revenue-generating tax. When the Harford County Council first asked the Harford Delegation for authority to raise funds for school construction through a menu of taxing options, the delegation would only support the impact fee, which the council then enacted in 2005.
Guthrie said recently that the council did not get what it wanted from the delegation, which was an increase in the transfer tax, because “[State Senator] Nancy Jacobs didn’t want to send us anything that had the word ‘tax’ in it.”
Guthrie singled out Senator Jacobs, but in fact the enabling legislation for the impact fee was a House bill sponsored by the Harford Delegation, which was passed unanimously by Maryland General Assembly. (Delegate Mary-Dulany James did not vote on the measure.) Guthrie is rumored to be a potential challenger to Jacobs in 2010.
As for the possibility that enabling legislation would be passed in the upcoming session to increase the transfer tax if the impact fee was repealed, State Senator Barry Glassman told The Dagger that an increase in the transfer tax was “off the table”. Glassman is the Senate Chair of the Harford Delegation, but he said that he was speaking on his own behalf.
Closer to home, Guthrie and Shrodes will have to convince at least two other council members to support a repeal of the impact fee.
Councilman Richard Slutzky (Dist. E) told The Dagger that he opposes a repeal saying “I have opposed previous attempts to repeal the impact fee and I oppose it again, especially in these economic conditions.” Slutzky said that the reason new homes are not being built has less to do with the impact fee than with the difficulty borrowers are having in qualifying for loans. But he said the larger issue is that the impact fee is one of the few local sources of revenue dedicated to capital school construction. He said that the revenue from the impact fee currently reduces the amount of revenue the county has to raise from other sources, including the issuance of bonds, which in turn reduces the possibility that taxes would have to be raised to meet the county’s continuing debt obligations. Slutzky said he’d rather not raise any taxes but “I would rather continue the impact fee…than have to raise taxes on everybody.”
The bill to repeal the impact fee will have a hearing on October 20, 2009 at 7 p.m. in the Council Chambers at 212 S. Bond Street in Bel Air.