Montgomery County Council Press Releases & Statements

Growth Policy, Recordation and Impact Tax Revisions Approved for Montgomery County
  • Release ID: 07-110
  • Release Date: 11/13/2007
  • Contact: Neil H. Greenberger 240-777-7939 or Jean Arthur240-777-7934
  • From: Council Office

Growth Policy, Recordation and Impact Tax Revisions Approved for Montgomery County

Council Tightens Policies on Development;
New School and Transportation Tests Affect Most Projects Filed After Jan. 1, 2007

ROCKVILLE, Md., November 13, 2007—The Montgomery County Council today adopted a stricter Growth Policy that reintroduces area-wide and maintains local traffic congestion tests; tightens school capacity tests; and increases impact taxes for schools and transportation.

The Growth Policy is reviewed every two years. The policy approved today will require a number of tasks of the Montgomery County Planning Board, including the development of sustainability and quality of life indicators to be used for future growth evaluations. Some of this work is required for Council review next year.

The 2007-09 Growth Policy was approved by a 7-1 vote, with Councilmember Nancy Floreen voting against the revisions. Councilmember George Leventhal was absent because he is recovering from injuries suffered in an automobile accident in October.

Among the decisions made today was to apply the new transportation and school adequacy tests to complete plan applications filed after Jan. 1, 2007, except plans that have already been approved by the Montgomery County Planning Board. The Council also unanimously approved impact tax rate increases to pay for schools and transportation tests. Those increases go into effect for plans submitted starting Dec. 1. The Council created a new category and set the tax rate at $0 for locally based social service agencies that are federally tax exempt. The same rate currently applies to hospitals and the biotech industry.

The Council also approved an increase in the County’s recordation tax for higher-priced (more than $500,000) homes and other properties. The bill was approved 7-1, with Councilmember Mike Knapp opposed.

The recordation tax is collected when documents must be recorded in the Circuit Court, such as the sale of a home (which also results in a transfer tax because there is a transfer of ownership) and the refinancing of a home (which does not result in a transfer tax because there is no transfer of ownership).

Funds raised by the rate increases (estimated at about $10 million in Fiscal Year 2009) will be equally divided between County government capital projects and rental assistance programs for low- and moderate-income tenants.

“I am pleased the Council has come together to create tighter standards for development,” said Council President Marilyn Praisner. “I am also pleased that the Council stuck with an effective date of Jan. 1, 2007 for any project not yet approved, thereby tightening a loophole that plagued the actions of past County Councils.”

The following is a summary of major Growth Policy revisions the Council approved:

Transportation adequacy test
• Establishes a new area-wide transportation test: Policy Area Mobility Review (PAMR), which evaluates the transit and roadway mobility in the near-term. As a result, this will require new development in two areas to mitigate 100 percent of the added traffic generated by the development, and new development in 21 other areas to mitigate up to 45 percent of the added traffic generated by the development.
• Tightens the congestion standards in the current intersection congestion test (Local Area Transportation Review) in 14 areas, expands the scope of the test for larger developments and requires greater mitigation for failing intersections.

School adequacy test
• The revised Policy will tighten the existing test in several ways. The revised test:
- Uses Montgomery County Public Schools (MCPS) program capacity as the definition of capacity, rather than a higher number used previously
- Eliminates “borrowing” of excess capacity from adjacent school clusters
- Sets 105 percent of program capacity in a school cluster as the threshold for requiring a School Facilities Payment, meaning that developers will have to pay significant fees when they build homes where schools are projected to be at 105 percent or more of capacity 
- Sets 120 percent of program capacity as the threshold for a residential moratorium, meaning if a proposed housing development would be located in a school cluster that is projected to be at or above 120 percent of capacity, the development could not be approved

NOTE: As a result of these revisions, residential development in nine clusters currently would require a School Facilities Payment. Residential development currently would be in moratorium in three clusters (Einstein, Kennedy and Clarksburg) until at least next July.
• Exempts subdivisions of three units or fewer from the test.
• Increases the School Facilities Payment from $12,500 per student (at any level) to $19,514 per elementary school student that would be added by new residential development; $25,411 per middle school student; and $28,501 per high school student
• Does not require a School Facilities Payment in an enterprise zone (Wheaton Central Business District and Long Branch) or in area that was formerly an enterprise zone (Silver Spring Central Business District).

Transportation Impact Tax
• Increases the tax rates by 70 percent, generating about $12-14 million more funds annually for County capacity-adding projects.
• Sets rates around the Kensington, Garrett Park, Washington Grove, Gaithersburg, Metropolitan Grove and Germantown MARC commuter rail stations at 85 percent of the County-wide rates. Rates around Metro Stations are already at 50 percent of the County-wide rates.

School Impact Tax
• Increases the tax rates by about 125 percent, generating about $15-17 million more funds annually for new schools and additions.
• Increases the large-house surtax from $1 to $2 per square foot.
• Applies the large-house surtax to single-family dwelling units larger than 3,500 square feet (rather than 4,500 square feet) up to 8,500 square feet.
• In residential developments with at least 30 percent affordable housing units (Moderately Priced Dwelling Units and units for lower income households), market rate units pay 50 percent of the applicable rate.

Recordation Tax
• For a property sold for more than $500,000, increases the rate by $3.10 per every $1,000 of the sale price (i.e., 0.31 percent) above $500,000. This is estimated to generate about $10 million more annually.
• The additional revenue would be divided, with half going for rental assistance programs for low- and moderate-income tenants and half for County government capital projects (roads, libraries, police and fire stations, etc.)

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