County Could Lose $1 Million - Plus Without Impact Fees

Budget Chief Sees Big Shortfall If Tax Is Cut

October 09, 1991|By Adam Sachs | Adam Sachs,Staff writer

The county would be hard-pressed to make up for lost revenue if it suspended its development impact fee, especially in light of the recent state budget cuts, the budget director told the county commissioners Monday.

But Commissioner Julia W. Gouge remains adamant about a study of suspending the fees, or extending the payment schedule, as away of boosting Carroll's sluggish homebuilding and home sales industries.

The commissioner agreed with Budget Director Steven D. Powell that any action on the impact fee -- levied on new residential construction to help pay for new schools, parks and a planned South Carroll reservoir -- should be postponed until the county solves its budget shortfall.

The deficit-reduction plan adopted by the state last week calls for a cut of about $2.6 million in direct aid to Carroll government. State-financed agencies providing services to county residents were cut by $2.8 million.

Prompted by Gouge's proposal two weeks ago, the commissioners asked Powell to evaluate how loss of the impactfee revenue would affect financing of construction projects and whatbenefits to the local economy might be realized by dropping the fee.Gouge also has suggested rescinding the fee.

The fees were the object of much debate and controversy leading up to their inception in March 1989. The $2,700 fee for new single-family homes and town houses -- $3,500 in South Carroll to help pay for the Gillis Falls Reservoir project -- typically is tacked on to the final price of a home.

The amount is compounded once a developer figures in increased costsfor interest and other factors involved in purchase agreements.

Powell emphasized Monday that the county has appropriated $1.2 millionfrom impact fee revenues to pay off construction project debts in fiscal 1992. The county collected $1.96 million in impact fees in fiscal 1991 and is projected to garner slightly less this year.

Debt payments are "ongoing expenses we'll incur," Powell said. "We predicated the expenses on this revenue source."

If impact fee revenues suddenly were choked off, the county would have to find about $1.2 million from other sources to maintain its debt payment schedule, Powell said. The situation would be compounded because the commissioners haverequested budget-reduction plans from all county agencies to addressthe current shortfall caused by state cuts, he said.

"It's $2.6 million (in state cuts) now and we know we're not finished," Powell said.

Gouge requested an analysis of the "spinoff" effect of dropping the fees -- whether such a move would help spur an increase in building, employment and consumer spending and help reduce home prices and government-assistance cases.

"We have to delve into every area to see what the possibilities might be," she said. "I don't want to put it totally on the back burner. I want to keep it considered as a possibility. We still have next year to contend with."

Powell said the analysis requested by Gouge involves "serious econometric modeling." He plans to contact state economists to see whether there is a statistically valid method for determining the impacts.

Without a complicated statistical model, Powell speculated that suspending the impact fee probably wouldn't be enough to counteract the statewide economic malaise.

"Carroll County can't lead Maryland out of the recession," he said. "We need to see a turnaround from a state perspective before we can boost Carroll County. Until we see that, we would be sacrificing money for no return."

Commissioner Elmer C. Lippy calledGouge's proposal a "good idea, but now it's in the realm of fairy tale. Right now, the numbers don't add up to any savings."

He added that he had received calls from several residents who opposed suspending the fees or altering payment schedules. The residents said such amove would not be fair to those who had already paid the fees, he said.

County Attorney Charles W. "Chuck" Thompson Jr. said his office still is researching whether the county has the authority to suspend impact fees, then possibly reinstate them later.

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