Officials Probe Legality of Tax to Repay Developers
Investigation Follows Separate Complaints From Two Clarksburg Groups
The Montgomery County inspector general’s office and three other county agencies are investigating claims from Clarksburg residents that a proposed $ 1,500 annual tax to repay developers for roads and sewers is illegal and violates planning agreements.
The probes were sparked by two separate reports that criticized a county proposal to reimburse developers for at least $ 60 million in road, sewer and other improvements in a new 14,000- home community in northern Montgomery. The developers had agreed to build the infrastructure in exchange for winning the rights to build three Clarksburg communities.
The tax, which homeowners would pay for up to 30 years, would illegally shift financial obligations from the developers to residents, the reports claimed.
Inspector General Thomas J. Dagley said in a letter to county officials last week that his office will look at financial data and other information used by county officials to budget nearly $ 18 million to repay the developer of Clarksburg Town Center, one of three developments that would be taxed, for the cost of building several roads.
County budget officials have been allocating the money for at least three years, even though the tax has not been finally approved by the County Council, budget documents show. It does not appear that any payments have been made, but officials were checking that last week.
Dagley said he was examining the road projects to gain a better understanding of how county officials estimate costs and allocate funds. He also is looking into other large construction projects, including two school system projects and three at Montgomery College. All are part of the county’s six- year, $ 3.3 billion capital budget, which Dagley’s office, an independent agency that reports to the County Council, is responsible for monitoring.
“ We will be examining the reliability of information provided to decision makers,” Dagley said.
Planning documents show that developers of three communities — Clarksburg Town Center, Clarksburg Village and Arora Hills — agreed to build most of the infrastructure for their developments. Beginning in 2000, the County Council, urged by thenCounty Executive Douglas M. Duncan ( D), adopted measures to authorize repayments to the developers, but it never gave final approval.
The results of the investigations are expected in late spring or early summer, officials said, and they could help answer a key question: Can a developer that agrees to build infrastructure later be reimbursed by taxpayers even if that was not spelled out in the original agreements?
The debate over the tax could create a political problem for many recently elected county lawmakers. Several new members of the council, as well as County Executive Isiah Leggett ( D), pledged during last year’s campaign to make developers more accountable for the effects of growth on the county.
Leggett has asked Acting County Attorney Marc Hansen to examine legal issues linked to the development tax.
“ There are multiple issues, and they are going to take some time to review,” Hansen said. Among the key questions is whether the Planning Board intended to specify who would pay for the infrastructure or only who would build it, he said.
Planning Board Chairman Royce Hanson said he has asked his legal staff to examine the reports and assess the board’s actions in approving the developments during the past decade.
County Council President Marilyn Praisner ( D- Eastern County) has convened a task force of council staffers to retrace the steps of staff members who worked closely with development attorneys Stephen Z. Kaufman and John Orrick, both of prominent land- use law firm Linowes and Blocher, to draft the tax legislation several years ago.
Amy Presley, president of the Clarksburg Town Center Advisory Committee, one of the groups that issued a report opposing the tax, said she was pleased that Dagley’s office had begun a probe but worried that the council’s staff was being asked to review its work. Staff members drafted the legislation that paved the way for the tax. Kathleen Boucher, a staff attorney, is leading the review and was not involved in writing the legislation.
Presley renewed a plea she made last week for an outside investigation of the legal questions, which Dagley’s office is not planning to examine. Presley said she thought an outside legal expert should be called in by the county.
“ It doesn’t make sense to us. We stand firm in our request that this be handled independently and objectively,” she said.
The idea behind the development district tax is to make new development pay for itself. It is widely used in California, where Clarksburg Town Center devel- oper Newland Communities based.
Several years ago, the County Council approved two other development taxing districts in Germantown, and officials said the questions raised about Clarksburg also could apply to those districts.
The tax controversy is the latest to erupt in Clarksburg, which until a few years ago was a sleepy community that developers and county officials for years had eyed for massive development as vacant land in Montgomery dwindled.
Two years ago, a residents’ group unearthed major construction irregularities in Clarksburg Town Center, which led to efforts to overhaul the county’s planning, zoning and permitting procedures and had a ripple effect on the political fortunes of several county officials.
That group, headed by Presley, issued one of the recent reports critical of the new taxing district; the other report came from a county panel convened last year by Duncan after residents said they were being unfairly saddled with the levy.
Meanwhile, residents of Arora Hills received letters several weeks ago from developer Artery Corp. saying the company was waiting for the county to enact the tax, but, failing that, the company would collect the tax itself.
“ The process of negotiating with Montgomery County regarding the details of the creation of the Development District have taken far longer than anticipated,” the letter said. “ The developer is not willing to continue these negotiations indefinitely. . . . By Dec. 31 the developer intends to decide whether to continue to negotiate with the County with respect to the establishment of the
is Development District, or to commence assessing the private infrastructure charge.”
Hayes McCarty, Artery’s executive vice president, said the company sent the letter because officials had grown concerned about the fate of the tax. “ It was everyone’s understanding that for all of the infrastructure to be built, and to be built in a timely fashion, the tax district would be the vehicle.” He said his company was worried that residents, some of whom moved in three or four years ago, had forgotten that they had agreed when they signed sales pa- pers that they might someday have to pay the tax. In the other two developments, many residents said they were never notified of a possible tax.
Representatives of Newland Communities, Clarksburg Town Center’s developer, have said they are looking into the reports’ claims. David D. Flanagan, president of Elm Street Development, the developer of Clarksburg Village, declined to comment.
Also, last week, Jennifer Russel, a special ombudsman appointed last year by Duncan to help coordinate issues related to Clarksburg, announced that she planned to resign and join Rodgers Consulting, a development firm based in Germantown. Her decision, she said, was made before the reports questioning the taxing district.