Elrich wants to replace the Development Impact Fee with a targeted tax plan

“It’s actually a win on the development side,” Montgomery County Executive Marc Elrich says of his proposal. (The Daily Record / Bryan P. Sears)

Montgomery County officials are seeking to change how the jurisdiction assesses taxes on new developments, which could make the county more attractive to developers and pay for new transit projects.

The proposal would create a property tax alongside planned rapid bus projects to replace developer impact fees. Montgomery County Executive Marc Elrich said the proposal, if passed, would allow the county to be more competitive with Northern Virginia as well as other parts of the state.

“We spend a lot of time analyzing Montgomery County versus our competitors and you know, the good news…we tax less than most of the surrounding jurisdictions,” Elrich said. “However, we have a misplaced tax in the process that raises the price of doing business in Montgomery County unlike other jurisdictions.”

Montgomery County already has the ability to create special transportation tax districts. This law includes the ability to draw sometimes complicated boundaries.

The change in how the county collects the tax would provide a direct revenue stream for projects, including bus rapid transit lanes along Rockville Pike.

Under the bill requested by Elrich, any project in a new transportation tax district would not be subject to the impact fee.

“It’s actually a win on the development side,” Elrich said. “It’s a county side win and it’s better than the existing (law) where I can’t protect people.”

The county executive said the fee would supersede or change how the county administers impact fees or existing special transportation charging districts. One such district includes the White Flint area, which has no plans to fund projects such as bus rapid transit lanes.

“It makes no sense to exclude them from partial funding and have everyone pay,” Elrich said.

Of the. Mark Korman, D-Montgomery and chairman of the House Appropriations Transportation subcommittee, warned that the absence of such an amendment could create problems.

“I think you’re going to have quite a battle on your hands at the state level and at the county level from these landlords,” he said.

Elrich said the impact fees currently levied force developers to factor in upfront costs.

“I wouldn’t do it if I didn’t think, at the end of the day, the county’s balance sheet will be at least as healthy as it would be with an impact tax with the added benefit of being able to build things long term,” he said.

Elrich said that under the current system, “each project (in Montgomery County) would cost more” compared to identical projects in northern Virginia.

Elrich said his proposal would focus on projects in affected areas.

The new long-term tax would directly fund 20- to 30-year bonds for specific projects “that would serve taxed locations,” the county executive said.

“It’s straightforward,” he said. “He serves communities. When paying impact taxes, there is no guarantee that the impact tax will even be spent where it is collected.

Elrich is requesting the change ahead of the eventual redevelopment of the site of the former White Flint Mall in Rockville. The site along Rockville Pike has been vacant since the mall was closed and razed six years ago.

The property was once shortlisted as a potential site for Amazon’s HQ2 project. More recently, there have been proposals to build a combination of offices, retail, residences and a hotel on the lot.

“I feel a certain urgency because I’m starting to see a lot of interest, for example, in White Flint around life sciences. Many people tell us about projects there and elsewhere in the county.

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