A reader and frequent correspondent to the newspaper, who is active in community issues, particularly growth and development, recently e-mailed.
"Can you explain special taxing district," she asked, pointing out how twice before, similar proposals were defeated by our legislators in Annapolis. "I think there's a minefield there."
I e-mailed back that I was very busy at the time, but would try to get back to her with a full explanation. I spent the last weekend thinking about STDs, the tax district, not the disease, but I'm not sure I'm as qualified to answer the question as the reader thinks I am.
The newspaper has taken an editorial position against the STD proposal which has been made by Harford County Executive David Craig. Even so, the legislative delegation seems inclined to give Craig and the Harford County Council some limited enabling powers to enact local legislation.
A few weeks back, just before the start of the Maryland General Assembly session, Craig met with members of our Editorial Board, of which I am one, to pitch the STD plan. He knew going in it would be a hard sell, because we have previously written against similar plans offered both by Craig's predecessor, and, by Craig himself, when he was mayor of Havre de Grace. Our session with the county executive and several members of his staff was cordial. He didn't try the smoke and mirrors approach or the hard sell. There were no dire predictions the sky will fall or the county will break off and sink into the Chesapeake Bay. Still, there were no Aegis conference room conversions, either.
Craig believes that special tax districts can be created in which the people who live in them pay property taxes over and above the rest of the county, to fund construction of their schools, roads, libraries, parks, fire houses, police stations and other facilities. Such special districts already are used by the county to fund water and sewer facilities, he notes, and some jurisdictions in the state, namely Montgomery County, have limited STD authority.
The main difference with the STD, is the developer of a new communities, or developers of several communities can, with authority from the county, use tax exempt financing to build the needed amenities — or actually fund special government services such as legal and administrative associated with the improvements, with the county in turn obligating special real estate taxes from the district to pay back bonds or loans made to build the facilities. Those taxes would be over and above what the owners of those houses (or businesses) would normally pay for general county services.
The advantage, according to Craig, is the STD gets the facilities done faster than by the conventional way and at no cost to the people who won't be using them. The tax exempt borrowing means there will be lower interest costs to finance the improvements. The county incurs no financial liability if bonds default — sort of, but we'll get to that later. Moreover, if a new fire house is needed to serve a wider area than the district, then those in the district would pay back a pro rata share of that or any other facility used by others outside the boundaries of the district.
Basically, it boils down to this: The county expects much of the growth from future residential and commercial/industrial construction will result from BRAC (There's that epithet again!). The state, while welcoming this BRAC growth, isn't going to help Harford County any more financially than it normally would; hence, money to build schools, upgrade roads, build new libraries and parks; and pay for infrastructure upgrades will have to come from local tax coffers.
Economically, the county faces some issues. Though it ended the most recent fiscal year last July with an accumulated $100 million surplus, Craig expects to spend that money down quickly, and a lot of it will go for the Bel Air and Edgewood high school replacement buildings, plus other capital needs, many tied to BRAC. Revenue growth is expected to slow because of the housing construction slump. Craig said last month that while revenues tied to new construction are projected to be down in the current fiscal year, the county isn't in trouble - yet. Another year like last year with less than 500 new houses approved, and it could be, he said.
The previous county executive persuaded the legislators and county council to impose an impact fee tax, basically a head tax on each new housing unit, to pay for schools. Fewer houses built means less revenue from this source, but Craig said the tax is working as expected. Still, other proposals by the current council to enhance the revenue stream, mainly a higher real estate transfer tax, have gotten the cold shoulder from legislators, and justifiably so. It's hard to ask for more taxes after the governor and legislature just passed the largest tax increase in state history last fall and the county acknowledges holding a $100 million slush fund in its own treasury.
So, why aren't special tax districts good for Harford County? For one thing, they'll only work in large scale developments. Basically, Craig wants this authority to spur development of the Mitchell Family properties, upwards of a thousand acres of farms in Perryman wedged in between Aberdeen Proving Ground and Bush River south of Aberdeen. The properties are zoned for development, but nobody has bitten on them yet, mainly because the size alone will make them expensive to finance and develop. Most large scale developments in Harford are less than 200 acres, not hundreds of acres. Other logical candidates would be if somebody came along and bought up large chunks of existing communities, in particular in the Route 40 corridor, and needed incentives to redevelop them. In other words, getting money from private sources will be difficult, unless a would-be developer wants to pay high interest carrying charges. The STD would presumably give a much cheaper alternative financing source, but only with the county behind the deal.
Some of my colleagues think STDs amount to developer giveaways. If there were a market for the development in the first place, somebody would come in and do it, no incentives necessary. Worse, in addition to the extra taxes home buyers in these STD financed developments will pay, additional liens will be placed against their properties to pay off those special bonds. Lawyers and real estate title people will obviously love the extra work, but how complicated can we make it for these home owners? And, I don't care what Craig and his finance people say, when you start putting Harford County's imprint behind private financing, you will get burned one day when somebody defaults, people move away and guess who gets left holding the bag, Mr. and Mrs. Taxpayer.
Craig left us with the impression he's open to any viable solution to the county's BRAC needs. Our position in the past has been the state needs to help out more, but Craig, while agreeing, says it's unrealistic. OK, so how about doing nothing and let market forces take their course. As we have said so often, people in Harford County pay plenty of taxes for the privilege of living here. We don't need any more taxes, disguised as gimmicks that sound like diseases, to lure more people here.
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