Of­fi­cials Probe Le­gal­ity of Tax to Re­pay De­vel­op­ers

In­ves­ti­ga­tion Fol­lows Sep­a­rate Com­plaints From Two Clarksburg Groups

The Washington Post Sunday - - Maryland - By Mi­randa S. Spi­vack

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.

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