Study favors impact fee in Harford

Report says it could bring in $19 million

council members like other options

November 28, 2003|By Lane Harvey Brown | Lane Harvey Brown,SUN STAFF

Harford County could earn as much as 22 percent of its current capital budget costs by imposing an impact fee on new development, according to a study recently completed by a Bethesda consultant.

The study by Tischler & Associates, which cost the county $8,500, leans toward impact fees over excise taxes to help raise revenue to pay for Harford County infrastructure needs, primarily school construction.

Using the roughly 1,900 new residential units added each year in the county as a guide, Tischler estimates that a $5,000 impact fee or excise tax per home could raise $9.5 million, while an impact fee of $10,000 per home could generate $19 million -- or 22 percent of the current capital budget.

Raising the real estate transfer tax, which is incurred when property titles or leases are conveyed, by half a percentage point would raise $9.6 million, the study says. Increasing the recordation tax, incurred on mortgages and other secured debt, could yield $12.2 million.

The administration of County Executive James M. Harkins moved to retain the suburban Washington firm in July after the County Council said it planned to ask the state delegation to seek General Assembly approval for new revenue options. Without legislation from the state body, the county cannot raise new levies.

Some County Council members, briefed on the study last week, expressed disappointment and said the study was general and seemed to favor impact fees.

"I was distressed that an important report that needed to give real-time information didn't have the depth it should have," said Richard C. Slutzky, a Republican who represents Aberdeen. He said he favors raising the transfer tax and perhaps imposing an excise tax on new construction, but he is still researching both levies.

"It wasn't what I expected. I expected a detailed analysis of which would be the best way to go," said Cecelia M. Stepp, a Republican whose district includes Abingdon and Havre de Grace. Stepp said she has not decided which option she favors. "I'm really getting the impression that the only thing that's being considered is an impact fee."

But John J. O'Neill Jr., the county's director of administration, said the study was "initial reconnaissance," similar to a preliminary design for a building.

O'Neill said the county had no leaning at this point toward the excise tax over the impact fee. "Basically, what we've been looking at is the pros and cons of each," he said.

The study, however, notes that priority is put on an impact fee in the report "based on our analysis and on discussions with the county executive."

Harkins could not be reached for comment.

Tischler's study outlines the next phase of more detailed analysis, which could cost the county as much as $126,000. O'Neill said the county cannot afford that, and officials may instead negotiate a compromise, where the consultant revisits some areas of the study to provide more detail.

"I thought it would be a little more in depth than it was," said Republican Councilwoman Veronica "Roni" L. Chenowith, who represents the western county. Chenowith said she favors an impact fee and an increased transfer tax.

"I think we need to move ahead with it," Chenowith said. "It's the right thing to do."

The county could have the option to raise the transfer tax and either the impact fee or excise tax, but not both, said Del. Barry Glassman, who represents northern Harford County.

While excise taxes and impact fees are levied on new homes to raise revenue, their structures are very different.

According to the study, impact fees relate only to capital expenses, not operating expenses or rehabilitation. They may be used to build schools, but not to remodel existing ones. They are designed primarily to mitigate the impact of growth in a specific area.

Excise taxes, on the other hand, the study says, have fewer strict oversights on how the tax is figured and where it is used. It may be used to pay for a new school or to renovate an aging one inside or outside a development area.

The development community dislikes those looser rules and would "never" support an excise tax, said Susan Stroud Davies of the Homebuilders Association of Maryland.

"We've been pretty adamant about that," she said, adding that the industry favored raising the transfer tax as the "lesser of three evils" because it applies to both new-home sales and to sales of existing homes, spreading the effect more fairly than an impact fee.

County Councilman Robert G. Cassilly, a Republican who represents the Bel Air area, whose high school is on the county's renovation or rebuilding list, said he leans toward the excise tax.

He said what he would like to see studied more is how much funding the county needs to reap from a new levy to pay for its school construction and renovation projects.

"We need some serious bucks to address these concerns," he said.

The Board of Education's current capital projects request for the next six years, school officials said, is about $197 million.

County Councilman Dion F. Guthrie, a Democrat from Joppatowne, said he questioned spending more money on further analysis. "How many studies do you need to tell you what's staring you in the face?" he said.

"I'm not crazy about the impact fee," he said. "I'm leaning toward the transfer tax and excise tax."

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