Community Associations & Maryland's New Stormwater Fees

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1 2018 Whiteford, Taylor & Preston LLP Community Associations & Maryland's New Stormwater Fees May 1, 2013 Highlight: Maryland has new local stormwater fees that will be implemented in certain counties beginning July 1, Counties and property owners affected: All real property, including those owned by community associations, located in Anne Arundel, Baltimore, Carroll, Charles, Frederick, Harford, Howard, Montgomery, and Prince George?s counties and Baltimore City. The only properties within those ten jurisdictions exempted by state law from paying the fee are those owned by the state, counties, municipalities and volunteer fire departments. Purpose: The purpose of the law is to establish the local means and dedicated funding source to implement local stormwater management plans and upgrade and restore stormwater management facilities, streams and creeks in the most heavily-developed areas of Maryland. Background: In December 2010, the U.S. Environmental Protection Agency issued the Chesapeake Bay Total Maximum Daily Load (?TMDL?), effectively establishing a?pollution diet? for nitrogen, phosphorus and sediment discharges to surface waters that the six Bay watershed states and the District of Columbia must meet by In order for Maryland to meet its pollution diet, the state's plans call for improvements to stormwater management practices contributing about 17% of nitrogen reductions and about 45% of the phosphorus reductions necessary to meet the TMDL goals. Current estimates of the cost to implement these stormwater improvements are approximately $7.4 billion statewide through Failure of a state to meet its pollution diet may result in the federal government withholding federal funding for state water management programs, the withdrawal of state authority to manage and issue all water discharge permits, and potentially significant fines. The Law: On May 2, 2012, Governor O?Malley signed into law House Bill 987. In short, the law requires those jurisdictions within Maryland that are subject to a Municipal Separate Storm Sewer System (?MS4?) Phase I permit to establish a local Watershed Protection and Restoration Program, including a local stormwater fee to fund its operations, by July 1, A last-minute push to

2 postpone the implementation of the stormwater fees to July 2015 stalled in the Maryland House of Delegates on the final day of the 2013 General Assembly session. How the fees are calculated: While the state law provides a general broad outline of what is required in each Program, it leaves the structure and operational details up to each individual jurisdiction, including exactly how they may generate the necessary funds. Jurisdictions are authorized to charge property owners flat rate fees, graduated amounts based on the amount of impervious surfaces or any other approach they prefer. The law does require that the local jurisdictions give some credit to property owners for measures that reduce the quantity or improve the quality of stormwater discharged from their property, and that the fees are adjusted for owners experiencing substantial economic hardship. Where the Counties are now: Each jurisdiction is engaged in the process of determining how to respond to the State?s mandate and structure its own Program. A one-page comparative spreadsheet of each jurisdiction?s current status may be found here. What Community Associations should do: Depending on its location, each community association should, at a minimum, consider the impact of these fees on its membership and/or on its own budget and determine if steps should be taken to obtain credits. Please note this is a rapidly-evolving matter in each county and Baltimore City. Sources used in compiling this summary may not necessarily reflect the most up-to-date information, so please consult your attorney. We are monitoring these issues closely and are prepared to answer questions and assist each community upon request. Anne Arundel County Bill No establishing the County?s Program and fee structure was passed by the County Council on April 15, However, the County Executive vetoed the bill on April 25th. On May 1st, the County Council overrode that veto, allowing the bill to become law. It is currently anticipated there may be some follow-up effort by the County Council in the coming weeks to amend fees charged to businesses and potentially consider a phasing-in of charges for residential property owners. The bill charges an annual flat fee for residential properties of $34, $85 or $170 per dwelling unit based on the property?s zoning classification. A fee of $85 per 2,800 square feet of impervious area will be charged annually for any multifamily residential and non-residential (i.e., commercial, industrial, agricultural, etc.) properties, with the following exceptions and modifications: The fee charged to multifamily residential properties that are condominiums will be divided by the number of dwelling units on the property and that amount billed separately to each condominium dwelling unit owner. If non-residential property is owned by a homeowners association (?HOA?), the total stormwater fee for all properties owned by that same HOA cannot exceed the number of

3 property tax accounts for property owners within the boundaries of the HOA multiplied by a fee of $34. Multifamily residential and non-residential properties charged more than $500 per year will be charged 60% of the calculated fee in Fiscal Year 2014 and 100% of the calculated fee in each Fiscal Year thereafter. The stormwater fee charged to non-residential properties will be capped at 35% of the property?s base real property tax bill. Nonresidential property owned by a religious group or organization will be charged a flat $1 fee, regardless of the amount of impervious surface on the property. The County Department of Public Works has been tasked with establishing regulations specifying the actions property owners may take to obtain credits for stormwater management practices that reduce the quantity or improve the quality of stormwater discharged from the property of up to 50% of the fee otherwise charged. The fee has been designated by the County as an excise tax and will appear as a line item on the property?s annual tax bill. Property within the City of Annapolis will be exempt from any final County fee as the City already charges a municipal stormwater utility fee. Baltimore County Bill was passed by the County Council on April 15, It establishes the general framework for the County?s Program, the fees for Fiscal Year 2014 and directs that a separate Executive Order will annually establish fees charged under the Program after Fiscal Year Future annual Executive Orders will set each year?s fees unless those fees are objected to by a majority of the County Council. The bill specifies that the fee charged to residential properties beginning July 1, 2013, will generally be $21, $32 or $39 per year. Residential, condominium or cooperative ownership properties (but not apartment complexes) will be charged $29 per dwelling unit. A non-residential, parcel owned by a condominium association or HOA will be treated as non-residential, non-institutional land and charged $69 annually per every 2,000 square feet of impervious surfaces. Institutional, non-residential property (i.e., private schools, churches, etc.) will be charged $36 annually per every 2,000 square feet of impervious surfaces. Other commercial and industrial property, including apartment complexes, will be charged $69 per every 2,000 square feet of impervious surface. Credits generated by recognized best management practices (?BMPs?) may not reduce the fee charged by more than 26% of the initial calculated rate. The fee will appear as a line item on each property?s annual tax bill. Carroll County At this time, no bill has been introduced by the Board of County Commissioners to implement the Program. The Board has charged the County?s Environmental Advisory Council (?EAC?), an established citizen stakeholder group, to study the available options and to make recommendations

4 to the Board of County Commissioners for legislation to implement a Program and associated fee structure. The EAC has been meeting and is scheduled to meet twice a month between now and June, with the intent of allowing the County to implement its program by July 1, Charles County Bill was introduced before the County Commission on April 16, It establishes the general framework for the County?s Program and directs that the fees charged shall be established by the County Commissioners each year as part of its annual budget process. While the fees proposed for this upcoming year have not yet been formally proposed, information suggests that the proposed annual residential fees will be approximately $11, $16 or $32 based on the dwelling type. In addition, a rate of approximately $32 per every 3,255 square feet of impervious surface is anticipated for non-residential property. It is anticipated that condominium properties will be charged approximately $11 per dwelling unit. As introduced, the bill is unclear as to how it will treat non-residential common area property owned by a condominium association or HOA. Frederick County Frederick County is currently preparing a draft ordinance to adopt the required Program that will be introduced to the Board of County Commissioners in the coming weeks. A Division of Community Development staff presentation was made to the Commissioners on March 7, 2013, during which various proposals were presented to establish a funding system similar to those introduced in other counties. In response, the Board of County Commissioners directed its staff to develop a plan charging a flat rate of cent ($0.01) per parcel. County staff anticipate the bill will be introduced by May 11, 2013, and that a public hearing will be held May 30th. It is unclear how the County anticipates fully funding work that may be required for its stormwater management program and whether or not a different fee structure may eventually be approved by the County Commissioners. It should be noted the Frederick County legislative delegation was the only one to introduce bills during the 2013 General Assembly session that would have specifically exempted Frederick County from the House Bill 987 mandate. However, this legislation did not make it out of the respective chamber committees. Note that the City of Frederick has a pre-existing fee program dedicated to stormwater management so properties within the City limits will not be subject to the County Program once implemented. Harford County Bill No was passed by the County Council on April 16, 2013, and approved by the County Executive on April 23, The bill proposes to charge an annual flat fee of $125 for any property with a residential use (except for apartment buildings) or agricultural use. A fee of $7 per 500 square feet of impervious area will be charged annually for any property with a business, commercial or industrial use, including apartment buildings, mobile home parks and separate common area parcels

5 owned by condominium associations or HOAs. However, nonprofit owners of these properties will be charged a flat fee of $125. Critically, the bill also limited the fees charged by the County to each property owner to 10% of the fees otherwise calculated as being due. A separate Resolution, No , was passed on April 16th to establish a Task Force that will meet to review and make recommendations to the County Council on the programs structure and fee schedule beyond Fiscal Year Credits of up to 100% of the initial stormwater fee calculated for a property may be applied based on the use of BMPs. Regulations will be developed by the County to implement the credit program. The fee will appear as a line item on the property?s annual tax bill. The fee will not apply to properties in Aberdeen, Bel Air, Havre de Grace or any other incorporated town or city as they are not subject to the County?s MS4 permit. Howard County Bill No. CB8-2013, establishing the County?s stormwater program and Resolution CR , establishing the program?s fees, were approved by the County Council on March 28, The bill and resolution established an annual fee of $15 per 500 square feet of impervious area to be charged to every improved residential, commercial and industrial property in the County. There are no flat fees established for residential properties as are common in other jurisdictions. Common areas owned by condominium associations, HOAs or other type of common ownership will be charged in the same manner. These common area stormwater fees would either be billed directly to the condominium association or manager of the property or, if no such association or property manager exists, equally divided among the number of owners within the association and added to their individual bills. The County program will apply a 50% reduction to the impervious area assessed for a property subject to a Site Development Plan that was filed with the County on or after January 1, A credit for the use of various specific stormwater treatment practices on properties will be available for properties not eligible for this automatic reduction, up to a maximum of 50% of the fee otherwise applicable. In addition, one-time reimbursements are available for investments in certain stormwater management practices implemented on properties where stormwater is not treated to the current State standards. The fee will appear as a line item on the property?s annual tax bill. Montgomery County Bill 34-12, expanding and amending the County?s existing stormwater management fee program, was approved by the County Council on April 17, The bill, together with Executive Regulation 17-12AM approved by the Council on April 30th, establishes the Program?s structure, procedures and implements a new fee program. The final rates charged under the Program will be set by Council action in mid-may and revisited yearly thereafter. For , annual single-

6 family residential rates are expected to range from approximately $29 to $264. Multifamily, commercial and industrial properties will be charged annually based upon a rate of approximately $88 per 2,406 square feet of impervious area on the property. The bill provides that one-third of the fees otherwise calculated will be charged in the first year, two-thirds charged in the second year and the full amount charged in the third year. Residential property developed as a condominium will be charged approximately $88 per 2,406 square feet of impervious surface, with the fee divided equally among and billed to each of the unit owners. Non-residential property owned by a condominium association or HOA is charged the same rate. In addition, privately-owned roads that are subject to public use and qualify for state highway funds are subject to these same fees. However, these roads may be able to qualify for grants to offset up to 100% of the stormwater fees they would otherwise be charged. The proposed Executive Regulation will also include a?tiered? cap for property owned by non-profit organizations. These three tiers, based on the actual amount of impervious surface on a property, will cap the amount the property owner may be charged. Credits of up to 60% of the otherwise calculated fee are available for properties subject to the most-current environmental site design stormwater standards; 50% for those that utilize less-advanced stormwater BMPs. Montgomery County's fees will not apply in the Cities of Rockville or Takoma Park as they have their own existing stormwater programs. The City of Gaithersburg has elected to have the County?s existing program apply within its boundaries. The fee will appear as a line item on each property?s annual tax bill. Prince George?s County Prince George?s County already charges a stormwater utility fee that may satisfy certain requirements of House Bill 987. However, the County and local municipalities that will otherwise be subject to House Bill 987?s requirements have engaged in discussions to determine if and how the County program should be adopted by those local municipalities. County staff are currently evaluating how the existing program should be structured, what fees should be charged, and system of credits and hardship exemptions. This final program will require legislative approval from the County Council prior to enactment by July 1, Baltimore City Bill No was introduced to the City Council on November 19, 2012, and remains pending before the City Council. Multiple public hearings and work sessions have been held throughout the process to discuss potential amendments to the legislation, and are currently scheduled to continue through at least May 14th. It is anticipated the fee structure currently proposed for certain property types and owners will be amended by the City Council. The annual fee would be invoiced to property owners in equal quarterly increments on the property?s water bill or, if no such water service is provided, on a separate bill to the property owner. As introduced, the bill proposes to charge an annualized flat fee of $48, $72 or $144 for

7 single-family residential properties based on the amount of impervious surfaces they contain. An annualized fee of $72 per 1,050 square feet of impervious area would be charged for other properties in the City. These non-residential rates are the highest of any of the ten jurisdictions when compared on an equivalent basis. With parcels utilized by separate commercial businesses or for multifamily residential purposes, the stormwater fee will be charged to the parcel?s?master water meter? account when available. If no such master meter is available, the fees will be divided equally among those meters assigned to that parcel. For shared common areas established as a separate parcel and serving condominiums or HOAs, the fees for that common area parcel will be assigned to the master water meter associated with that common area parcel whenever possible. If there are multiple water meters associated with that shared common area parcel, the fee for that common area parcel will be divided equally among the metered billing accounts unless the common area property owner directs otherwise. In addition, draft regulations to implement the City?s program were provided for stakeholder and public review on April 1st. The draft regulations provide that credits may be applied in amounts not to exceed 45% of the initial calculated fee. While standard stormwater best management practices apply to account for credits generation, Baltimore City is unique in allowing residential property owners to participate in events such as stream cleanups, tree plantings and de-paving events in order to reduce the fees they are charged.

8 M. Trent Zivkovich advises clients and handles appeals and credit applications for local stormwater fees, known by some as the?rain tax?, on behalf of commercial and industrial clients throughout the state of Maryland. For additional information please contact him at or

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