Tag Archives: Marc Elrich

Adam Pagnucco, Marc Elrich, Property Taxes, taxes

County Screw-Up Led to Tax Hike Proposal

By Adam Pagnucco.

Buried in the fine print of County Executive Marc Elrich’s recommended FY21 operating budget is a shocking revelation: the executive claims that a mistake made by county revenue estimators two years ago has caused tens of millions of dollars in losses for the county.  One reason why the Elrich administration is proposing a tax hike now is to recover that money.

To understand what happened, we have to understand how the county’s charter limit on property taxes functions.  Here is the exact text of the charter limit.

Unless approved by an affirmative vote of all current Councilmembers, the Council shall not levy an ad valorem tax on real property to finance the budgets that will produce total revenue that exceeds the total revenue produced by the tax on real property in the preceding fiscal year plus a percentage of the previous year’s real property tax revenues that equals any increase in the Consumer Price Index as computed under this section. This limit does not apply to revenue from: (1) newly constructed property, (2) newly rezoned property, (3) property that, because of a change in state law, is assessed differently than it was assessed in the previous tax year, (4) property that has undergone a change in use, and (5) any development district tax used to fund capital improvement projects.

In plain English, what this means is that the county’s real property tax receipts (with a few exceptions) may not rise at an annual rate exceeding inflation unless the entire council votes to exceed it.

Calculating the charter limit involves three basic steps.  First, one must estimate the value of the assessable base subject to the charter limit.  Second, one must calculate the value of the many property tax credits offered by the county.  Third, one must calculate the levels of real property tax rates that, when applied to the assessable base and taking account of the credits, produce an increase in receipts equal to the rate of inflation.

Hence, estimating the size of the assessable base is critical.  If it is underestimated, property tax rates will be set too high and the charter limit will be violated.  If it is overestimated, property tax rates will be set too low and the county will not collect as much revenue as it could at the charter limit.  These are extremely technical considerations but this affects tens of millions of dollars (at least) for the county budget.

In his recommended budget, the county executive makes this statement:

I am proposing this supplemental tax rate this year to partially offset an unexpected underperformance of the property tax for the last two years. In preparing the FY19 County budget, the taxable property base of the County was overvalued. As a result, the property tax rate needed to generate revenues at the Charter limit for the past two years was set too low. This resulted in lost revenues of $80 million, now permanently embedded in our revenue projections.

The amount of revenue lost by this mistake was $35 million in FY19 and $45 million in FY20.  Because of compounding, the lost revenue will rise each year unless it is recovered.

It’s important to note that Elrich was not yet the county executive when the FY19 charter limit was estimated.  That was done by the finance department in former County Executive Ike Leggett’s last year.

Must the losses be stanched?  The county usually allows property tax receipts to rise up to the charter limit each year, but there is nothing in county law requiring that.  For example, in FY13, Leggett recommended level-funding of property tax receipts, which actually kept them below the charter limit.  The amount of forgone revenue was estimated at $26 million that year, which would have risen in subsequent years.  However, this was not the result of an estimation mistake.  The county had doubled the energy tax two years before and had not sunset it as was promised.  Forgoing a bit of property taxes was something of a consolation.

This issue must be frustrating for all concerned.  County leaders have a choice.  They can live with the mistake and move on.  Or they can tell voters, “We screwed up and now we need to raise your taxes.”

If option number two is selected, how do you think folks will respond to that?

Dear reader, if you are someone who is considering running for office someday, remember this story.  Something terrible could happen to you when you run.

You could win!

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budget, Montgomery County Executive

Marc Elrich’s Budget Message

The following is the overview from the $5.9 billion budget proposed by Montgomery County Executive Marc Elrich. You can find the full budget proposal below:

This budget is focused on providing our youngest residents with a great start to life. To that end, I have proposed funding of $2.8 billion for the Montgomery County Public Schools (MCPS). I am also proposing $10.4 million for our Early Care and Education Initiative so that we can continue to expand and improve early education services.

This budget contains a modest 0.8 percent increase in tax-supported spending for County Government, which is directed primarily at increasing affordable housing and addressing structural gaps in our fire service and transit budgets. This budget provides our residents with a great amount of detail about my entire $5.9 billion recommended budget.

This budget also ensures that we attain our fiscal policy goal of holding 10 percent of our adjusted gross revenues in reserve in FY20, and we maintain that level in FY21. This is of particular importance now as we face uncertain times.

As I finalize the details of my recommended budget, I am keenly aware of the public health emergency facing our community and the nation. I am proposing this budget with a focus on both the next few days and weeks, as well as the next year and beyond. As we respond to this global health emergency, the economic situation of our residents and our nation are changing rapidly. While this budget reflects my view of County Government on March 16, we all need to be flexible to respond to changing conditions and needs. These conditions may result in me submitting revisions, supplementals and amendments to alter this proposal as conditions warrant.

As we address the immediate needs of our residents and plan for the future, one thing has become abundantly clear to me – our County Government’s revenue structure has reached the breaking point and must be fundamentally altered.

Our County Charter includes a provision that limits the growth in property tax revenue – not property tax rates – to the growth in the Consumer Price Index (CPI) for all consumers in the Baltimore-Washington Region from the December 1 to November 30 of the preceding year. Since the Federal Government no longer publishes this index, we have been using the CPI for just the Washington Region. For the period of December 1, 2018, to November 30, 2019, the CPI for the Washington region was only 1.27 percent. No matter how much assessments increase, the total amount of property tax revenues cannot grow by more than 1.27 percent.

It is important to note that this revenue limit does not mean the average property tax bill will only increase by 1.27 percent. Quite the opposite. Most individual bills will increase (or decrease) by the change in one’s taxable assessment. Since County law limits growth in assessments to 10 percent in any given year, a property with such an increase in value will see its tax bill go up by roughly 10 percent. The Charter revenue limit only redistributes the tax burden from properties with little to no increased value to those properties with the greatest increase in value. This has meant that some residents in modestly priced homes have faced 10 percent increases while some high-value properties actually saw their tax bill cut.

When the County Council proposed to the voters our current Charter limit on property taxes in 1990, few people could have foreseen the dramatic changes that would take place in Montgomery County and around the globe. In the past 30 years, our school population has grown by 65 percent and our overall population has grown by 40 percent. The services we provide are now more complex and seek to address a range of challenges, from traffic congestion and climate change to health care disparities and linguistic diversity. And over the past four decades, our property tax rate has declined by 35 percent.

We have all witnessed other local governments regionally and nationally experience generational decline due to conflicting, irreconcilable fiscal policies. Montgomery County is at the precipice of such a decline if we cannot get ourselves out of this cycle of self-enforced structural deficits and inequitable, unpredictable revenue caps. Therefore, I will be sending the Council a proposal for a Charter amendment that will revise our revenue cap to provide certainty to homeowners. This proposal will eliminate our old, cumbersome revenue cap and replace it with a three percent cap on the increase in any homeowner’s taxable assessment. This will give our taxpayers real protection from unexpected increases in property values. It will also provide the County Government with a higher degree of predictable tax revenues like every other jurisdiction in our region.

Without such a change in the Charter, our community could be facing a situation in FY21 where a recession and deflation cripple our ability to provide emergency services and a quality public education system. This perfect storm would threaten lives and diminish the value of properties in our County. I will not stand by and let our community be harmed by the ghosts of voters from four decades ago.

In order to meet the challenge of our rapidly growing school system over the next year, this budget proposal also calls for the creation of a 3.1 cent supplemental property tax rate. State law provides each county with the authority to establish a supplemental property tax rate exclusively for its public schools. While this will be the first use of this State authority in our county, three other counties have already established a similar supplemental tax for their public schools. Even with this additional funding, we will still be providing the school system with less support per pupil than in 2010. A decade of slow growth nationally, unpredictable tax policy changes at the Federal level, and our severe Charter limit has left our schools playing catch-up on funding while absorbing an enrollment growth of more than 25,000 new students.

I am proposing this supplemental tax rate this year to partially offset an unexpected underperformance of the property tax for the last two years. In preparing the FY19 County budget, the taxable property base of the County was overvalued. As a result, the property tax rate needed to generate revenues at the Charter limit for the past two years was set too low. This resulted in lost revenues of $80 million, now permanently embedded in our revenue projections. Fortunately, the income tax has overperformed estimates during FY20 to offset this loss. However, even before the current COVID-19 crisis developed, we were forecasting income tax revenues to drop to a lower level. With this supplemental tax rate, we will be back to the rate set for FY17. We will remain significantly lower than other Maryland counties and in line with the residential rates in Northern Virginia. It is also important to note that the Northern Virginia counties charge higher rates for commercial properties with even higher rates for commercial properties in business districts like Tysons and Crystal City.

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Adam Pagnucco, Marc Elrich, Property Taxes, taxes

Elrich Then and Elrich Now

By Adam Pagnucco.

The big news coming out of County Executive Marc Elrich’s recommended Fiscal Year 2021 budget is that he is proposing a tax hike.  As you might imagine, I will have something to say about the specifics of that tax proposal in future days.  But first, it’s worth remembering what Elrich said about taxes when he was running for executive two years ago.  Over and over, he made statements ranging from saying that he did not want to raise taxes all the way to flatly refusing to raise them.  Consider the following:

1.  In July 2018, Elrich told WAMU that he “doesn’t want to raise taxes, but would like to see developers pay a greater share of infrastructure costs in the county.”

2.  In a candidate forum in October 2018, Elrich said, “I’m not raising taxes and I’m not raising fees.”  Check out Elrich’s remarks at 1:25 of this video.

3.  In May 2018, Bethesda Beat reporter Lou Peck asked Elrich this question:

As county executive, could you foresee yourself proposing a property tax increase above the charter limit of the rate of inflation, requiring another unanimous council vote?

Elrich replied:

I would seriously hope not. I feel that before you go talk about a tax increase, I would have to demonstrate to people that I’ve done everything I can do to lean out the county, to make sure we’re as efficient as possible, that I’ve taken people and been able to repurpose them, rather than just going to taxes first. I think the days of going to taxes first are over.

4.  In November 2018, Elrich said the following to Source of the Spring:

“A lot of people ask me about taxes,” Elrich said. “One of the issues in the campaign, people said, ‘Oh, Marc is going to bring in all these massive numbers of social programs and raise taxes on everybody.’ And actually that’s not what we’re doing. We know that the budget is going to be constrained.

“We’re pretty committed to staying inside the box and trying to run the government more efficiently,” he continued. “I’ve been telling people I’ve got $5.5 billion or more in revenue, and if I’m going to look for doing new things and being creative, I’m going to look at the revenue I have [and] figure out how to use it better. I think we can do a better job.”

5.  Immediately after he was elected, WAMU asked Elrich about taxes.

Despite being Maryland’s largest county with more than a million people, Montgomery County tax revenues aren’t growing fast enough to keep up with rising costs, Elrich said.

But, he said, a tax increase is out of the question.

“If you don’t handle the money you have better, you’re gonna have a hard time doing what you’re doing today, let alone doing things that you need to [in the future],” Elrich said. “But I think it’s actually a good thing to have this decision that there’s not going to be additional taxes because it means you actually have to think about what you’re doing.”

As a candidate, Elrich proposed an alternative to tax hikes: restructuring the government to increase efficiency and save money.  In a November 2018 op-ed in the Washington Post, Elrich wrote:

Far from saddling taxpayers with higher bills, I will streamline county government. Unions and their members, our county’s workforce, know and trust me. That is why we announced our plan to restructure county government together. Our county is facing difficult financial times; without thoughtful changes, employees will face across-the-board cuts.

Elrich elaborated on his restructuring plans in his 2018 questionnaire response to the Greater Silver Spring Chamber of Commerce.

I have explained how I would begin to rethink government in my First 90 Days Financial To-Do List, which you can find on my website. In this list, I lay out how I would initiate a long-term financial plan, increase the net profit contribution from the Department of Liquor Control, begin a structural review of county departments in partnership with the county workforce, implement a labor-management partnership called gainsharing (in which both parties agree on targets for improving performance and reducing cost and everyone receives a share of the savings generated), leverage a business process improvement system called Lean, assess the appropriateness of county reserve levels, improve data practices, review non-competitive county contracts, establish an innovation fund, increase government accountability, and develop budgets that prioritize spending and ensure that the county meets financial commitments in a sustainable way.

After Elrich’s election, the Sentinel interviewed him and reported, “Elrich said he plans to restructure the County government to make it run more efficiently, saying that doing so will help pay for the new programs he proposes without needing to raise taxes.”

So according to candidate Elrich, there would be no need for tax hikes because he would work with the unions to restructure government and save money.  What is his actual governing record through his first two budgets?

1.  Elrich’s recommended FY20 operating budget contained an increase of 82 full-time equivalent (FTE) positions in county government.  This does not include position increases in other agencies like MCPS, the college or park and planning.  The personnel cost increase recommended for county government was $37 million.  For the three county government unions, Elrich negotiated contracts containing raises of up to 9.4% for some employees.

2.  Elrich’s recommended FY21 operating budget contains an increase of 189 FTEs in county government with a personnel cost increase of $21 million.  Again, this omits increases in MCPS, the college and park and planning.  Elrich’s negotiated contracts with the three county government unions contain raises of up to 8% for some employees plus lump sum bonuses of $1,000 and longevity increases for some employee categories.

3.  The county council trimmed Elrich’s contract with MCGEO last year but his contracts and increases for managers and non-union employees this year will cost a combined $27.4 million in FY21 and $37.7 million each year thereafter.

And so, if there has been any restructuring at all, it has not saved any money or created any obvious new efficiencies.  Instead of streamlining government – as he said he would do – Elrich just wants a tax hike.

Would anyone like to rerun the 2018 county executive election right about now?

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Adam Pagnucco, Marc Elrich, Property Taxes, taxes

Is This the Worst Communications Debacle in County History?

By Adam Pagnucco.

As MoCo residents are just now starting to find out, County Executive Marc Elrich has recommended a property tax hike as part of his Fiscal Year 2021 budget.  And how did they find this out?  The first mention of it came from a county council statement released at 1:05 PM today opposing the tax hike.  As of this writing, the public knows little about the budget other than the fact that it contains a tax increase.

With the coronavirus spreading and the local economy on its knees, how do you think folks are going to feel about that?

Let’s set aside for the moment any analysis of the merits of the tax hike.  (That will come.)  Instead, let’s consider how a competent administration would try to roll this out.  In the past, administrations held press events with the council on the mornings of their recommended budget releases.  Right after those events, press releases went out containing loooooooong lists of all the goodies in the budgets.  More money for schools?  Check.  More social workers?  Check.  Increased numbers of police officers?  Check.  Big Macs for every girl and boy (or quinoa for the healthy eaters)?  Check.  Doug Duncan, Ike Leggett – it didn’t matter who it was, they all put on a Santa cap and handed out cookies from the chimney, at least when there wasn’t a recession.

But this budget contains a tax hike.  No problem, plenty of budgets in the past contained tax hikes.  You sell those tax hikes based on what they buy and other factors making them necessary.  Leggett, for example, sold his FY11 doubling of the energy tax hike as being the only way that he could preserve the bond rating.  In FY17, the county council sold its 8.7% property tax increase as an “Education First” budget.  It didn’t matter so much whether they were right.  The point is that they had an argument to make.

And now to today.  The administration was always going to face hurdles in selling a tax hike.  After all, the council just two weeks ago said that they didn’t want more taxing authority from the state because they weren’t interested in raising taxes.  So what do you do?  First, you line up advocates who benefit from the tax hike and forge them into an army.  That shouldn’t be so hard since the teachers, the service employees, MCGEO, the non-profits, the enviros and lots of other stakeholders are getting a piece of the new money either directly or indirectly.  Invite them to your presser.  If the coronavirus prevents that, get them in writing.  Have them make videos.  Include supportive quotes from them in your own communications.  Have them all up team up on an online petition.  (MCGEO already has one that they promoted through a mailer.)  Have them send out supportive blast emails and social media posts the very morning on which the budget is released.  And so on.  The point here is that this isn’t just the executive’s budget.  It belongs to all of these other groups too.  This makes the council members understand that they would pay a price by voting no.

The budget isn’t drafted overnight; it takes weeks to prepare.  That means the executive branch had time to get ready.  They should have lined everything up and beat the council (and everyone else) to the punch.  Yeah, the critics are going to cry about it, but let them go last so YOU can define this budget first.  Instead, the administration did… apparently nothing.  There was no morning press event, even a livestreamed one, and there were no preemptive communications – at least none that I saw.  The very first communication released from the county came from eight council members who opposed the tax increase.  As of this writing, other than a brief statement from Elrich defending the tax hike, there is STILL no comprehensive communication from the county listing all the benefits of the budget.  Is anyone other than Elrich out there defending it?

What a disaster!

So who should be upset about this?  It shouldn’t be the tax opponents.  The administration’s incompetence allowed them to define the budget around the tax increase.  Robin Ficker has to be bellowing in joy right now.

The folks who should be really upset are the ones who might benefit from the tax hike.  A proper communications effort should have been designed to get the council to hold off on expressing opinions about the increase, thereby buying time for the advocates to lobby them and start shifting some votes around.  Instead, eight council members said no immediately in the most public way possible.  (Council Member Nancy Navarro, who has chaired the council’s tax-writing committee for ten years, followed up with a hell no.)  It would be very hard for the council to move off that now.  As for the advocates, instead of waging a common battle for a bigger pie, they might have to fight each other for scraps as the council figures out how to reduce the executive’s increase in county expenditures.

And so, because of an epic communications debacle, a tough sell has become damn near impossible.

Congrats to the administration.  Or something.

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Adam Pagnucco, Marc Elrich, Property Taxes, taxes

Elrich Defends His Tax Hike

By Adam Pagnucco.

Forty-five minutes after eight members of the county council released a statement opposing the property tax hike contained in County Executive Marc Elrich’s recommended budget, the executive has released a statement defending it. We reprint it below.

Montgomery County Executive Marc Elrich’s Statement on Release of his Recommended Fiscal Year 2021 Operating Budget

As required by the County Charter, I submitted my annual budget to the County Council earlier today. My staff and I have been working on this budget for more than six months. During that time, we received budget requests from the community, the school system, our departments and Councilmembers that help to shape this budget proposal. The three-cent increase is a special tax that is specifically designed for education and would help to fund the budget request from Montgomery County Public Schools.

At the time that we were developing this budget, COVID-19 was not on the horizon and now, during these unique and difficult times, we have to factor in its impact. I stand by the need for us to increase our investment in education, but I understand the unique situation that we are currently in. We have all known from the beginning that funding the school system’s request could not be funded within anticipated revenues and, as we have been working at the State level to increase school funding through the Build Act and Kirwan, I believe that we should make the additional investment in schools that they need today, even if it required a special tax increase dedicated to the schools.

I combined this proposed three-cent special schools tax increase with a $108 increase in the County’s property tax credit so that a homeowner with a $500,000 home would see about a $42 annual tax increase—the three cents would raise the taxes by $150, but combined with the County property tax, the net increase is $42. A one million dollar home would have a net $192 per year increase. 

As in every budget cycle, I have informed the Council that I will work with it to find ways to deal with the budget.

Dealing with today’s emergency situation and having a long overdue community conversation about the future we want to build for our County will be a challenge in coming weeks.  The challenges we face in areas such as education, economic development and transportation will still be there long after this crisis is over and we can’t take our eyes off the future no matter how hard those decisions will be. I know that in today’s context it is hard to determine what the future looks like, but we will balance addressing our present situation with planning for the future of this County. And we will do it together.

To learn more about the recommended operating budget, go to https://www.montgomerycountymd.gov/operatingbudget

# # #

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Adam Pagnucco, Marc Elrich, Property Taxes, taxes

Elrich Recommends Tax Hike, Council Says No

By Adam Pagnucco.

County Executive Marc Elrich has proposed a 3.18 cent property tax hike in his recommended Fiscal Year 2021 operating budget, which was released today. The budget does not state the exact size of the tax hike, but because state data indicates that the county collects almost $20 million per penny in real property taxes, the tax hike is probably in the vicinity of $60 million.

Soon after receiving Elrich’s budget, the entire county council except for Council Member Tom Hucker released a statement opposing the tax hike. Their statement is reprinted below.

Statement by Montgomery County Council President Katz and Councilmembers Albornoz, Friedson, Glass, Jawando, Navarro, Rice and Riemer on the County Executive’s Fiscal Year 2021 $5.9 Billion Operating Budget Recommendation

ROCKVILLE, Md., March 16, 2020—Montgomery County Council President Sidney Katz and Councilmembers Gabe Albornoz, Andrew Friedson, Evan Glass, Will Jawando, Nancy Navarro, Craig Rice and Hans Riemer, made the following statement on County Executive Marc Elrich’s proposed 3.18 cent property tax increase in the fiscal year 2021 Recommended Operating Budget:

“Our focus in the midst of an unprecedented health emergency must be on bringing together businesses and residents, nonprofits and government to address the immediate crisis we face. We also must provide as much certainty and support as we can for county residents who understandably fear what the economic realities of this global pandemic will have on their jobs, retirement savings, small businesses and families.

This is a time for cautious decision-making, not property tax increases. We look forward to working with the County Executive to address the initiatives in his budget recommendations.”

# # #

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Adam Pagnucco, budget, Hans Riemer, Marc Elrich

Affordable Housing Spat: Who’s Right?

By Adam Pagnucco.

County Executive Marc Elrich and his biggest critic, Council Member Hans Riemer, are feuding once again.  This time, the subject is affordable housing.  Elrich says his new recommended capital budget includes a record sum for affordable housing.  Riemer says there are in fact no new resources.

Who is right?

Let’s consider the statements from each of them.  First, here is Elrich.

Affordable housing is one of my top priorities. It is vital to our County’s future success. We must maintain and expand our stock of affordable housing and we are taking this critical issue head on in the capital budget. That is why I am recommending we add $132 million for affordable housing to the capital budget over the next six years.

This is a record level of funding for affordable housing projects for our capital budget. These funds will be used by the Affordable Housing Acquisition and Preservation Project to facilitate efforts to preserve existing stock and increase the number of affordable housing units in the County. But that is not all.

In this Capital budget, I am proposing a new Affordable Housing Opportunity Fund to leverage funding from other partners that will support short-term financing while affordable housing developers arrange for permanent project financing.

Here is Riemer’s response.

On affordable housing, I was initially encouraged by the Executive’s speech about increasing funding levels. Indeed, I am intrigued by his proposal to create a new housing preservation fund. However, while he claims to have added more than $132 million in the affordable housing fund, after further examination it became clear that the annual amount is unchanged at $22 million. Under the last Executive, affordable housing funding was only programmed for the first two years of the six year budget, but additional funding was always added in the subsequent years. We need to increase our affordable housing fund to at least $100 million annually. This change in accounting will not result in increased resources. In combination with his resistance to the Council’s affordable housing goals, developed with and agreed upon by all the local governments in Washington region, the County Executive’s housing policy continues to be a matter of serious concern.

These two like each other about as much as Popeye and Bluto.  (Which one is Popeye depends on your point of view!)  But how can their statements be reconciled?

Since Fiscal Year 2001, the county’s primary affordable housing vehicle has been its Affordable Housing Acquisition and Preservation program, which appears in the county’s capital budget.  The program enables the county to buy or renovate, or assist other entities to buy or renovate, affordable housing.  It is financed by several sources including but not limited to loan repayments and the county’s Housing Investment Fund (which is mostly supported by recordation taxes).

The capital budget, which includes the Affordable Housing Acquisition and Preservation program, is a six-year budget.  In even years (like 2020), it is written anew and in odd years, it is amended.  Projects in the capital budget can have up to six different years of funding in them (with more scheduled outside of the budget’s six year horizon).  In the past, the affordable housing program has only shown funding for the first two years of the capital budget with zero money programmed in the last four years.  But since the capital budget is rewritten every two years with affordable housing money renewed in each successive budget, that has not mattered.

The table below shows funding for the Affordable Housing Acquisition and Preservation program in the last 16 capital budgets.  Each budget covers six years.  Budgets labeled with an “A” are amended budgets programmed in off years.

At first glance, Elrich appears to be right.  His new recommended capital budget includes $132 million for Affordable Housing Acquisition and Preservation, which is far higher than any previous capital budget.  But let’s remember what Riemer said about the annual amount of spending.  All the previous six-year budgets included funding during the first two years only.  Elrich’s new capital budget shows funding for the Affordable Housing Acquisition and Preservation program in all six years.  Riemer is correct: an accounting change caused the apparent increase in this program.

But the story doesn’t end there.  Elrich created a new program in the capital budget called the Affordable Housing Opportunity Fund.  This program is dedicated to acquiring affordable housing in areas at risk of rent escalation, such as those near the Purple Line and other transit corridors, and is intended to use public funds to leverage private funds in acquiring and preserving affordable housing.  This new program provides $10 million in each of the new capital budget’s first two years for this purpose.  That money comes from recordation tax premiums which are normally used to finance transportation projects, so it’s not “free” money.  But it is more money for affordable housing.

Combining the existing Affordable Housing Acquisition and Preservation program and Elrich’s new Affordable Housing Opportunity Fund, the table below shows the annual expenditures for affordable housing in the capital budget since FY05.  Annual expenditures are drawn from the first two years of every amended capital budget with FY21 and FY22 drawn from the executive’s new recommended capital budget.

Combining the two programs, Elrich recommends spending more capital money for affordable housing in FY21 and FY22 than any annual expenditure in the preceding published budgets.  When adjusting for inflation, Elrich’s FY21 and FY22 spending amounts are roughly equal to the Leggett administration’s peak affordable housing years of FY09 and FY10, so one can quibble about whether Elrich’s spending is truly a record.  But when Elrich’s new Affordable Housing Opportunity Fund is included, the first two years of his new budget definitely show an annual increase for affordable housing over the prior budget.

The county’s capital budget has been shrinking due to cutbacks in general obligation bond issuances and declining projected school impact tax receipts.  That’s a dire subject for another time.  But given the county’s budget difficulties, Elrich’s financial commitment to affordable housing is meaningful.  Friends and foes alike should give him credit for it.

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Adam Pagnucco, Marc Elrich, Montgomery County Council

Grading the County Council

By Adam Pagnucco.

Regular readers know my views on the administration of County Executive Marc Elrich by now, but let’s turn to an equally important entity: the Montgomery County Council. The county’s charter gives the council enormous powers, especially over land use, legislation and the budget, and its decisions are at least as important to the county’s direction as the activities of the executive.

The current council has four freshmen, the most at any one time since the council of 2006-2010. The freshmen include a former county department head, a former senior state government official, a former Obama White House official and one of the county’s most seasoned civic activists, so they came well-prepared to serve. In fact, they have become so ensconced at the council that they don’t seem like true freshmen any more. Overall, while the council has some internal rivalries that occasionally can be seen, it has been devoid of the open infighting that plagued many prior councils. Like them or not, they have mostly stuck together during the trials of governing.

The council’s portfolio is vast and it has made dozens of decisions in its first year. In my view, eight consequential events rise above the others. The council’s performance on these events is the determinant of its overall grade, which appears at the end. Let’s get to it.

Mid-year savings plan (January)

The new council members had hardly adjusted their dais seats when they were confronted with a $41 million budget hole, prompting a mid-year savings plan from the executive. The council – and especially the new members – could have complained, delayed and otherwise squirmed. But instead they got down to business and made the cuts in short order.

Grade: A

MCGEO agreement (March through May)

After Elrich negotiated a set of raises with the largest county employee union that included a peak raise of 9.4%, the council had to decide on their affordability. This was not easy as the union had a long history of torturing defiant politicians. But the council stuck together and unanimously forced Elrich to negotiate slightly lower raises. Expect this issue to return if Elrich negotiates more mega-raises in the face of the county’s financial problems.

Grade: A

MCPS and Montgomery College funding (March through May)

When Elrich released his first recommended budget in March, two of the losers were MCPS and Montgomery College. MCPS received a stingy 0.9% local dollar increase while the college got an absolute cut. Council Member Craig Rice, who chairs the council’s Education and Culture committee, called the budget “an education last budget.” But the council didn’t do a lot better. Yes, it cashed a big state check containing Kirwan money to help MCPS. But local funding for MCPS went up by just 1.2% and the college still took a cut.

Grade: C

OPEB raid (March through May)

One of the biggest problems with Elrich’s budget was that it relied on a $90 million raid on the county’s OPEB fund, which pays for retiree health benefits. The council grumbled about it, but approved the raid on an 8-1 vote with only Council Member Andrew Friedson dissenting. The result was a comment from Wall Street credit agency Moody’s labeling the move “a credit negative.”

Grade: D

Accessory dwelling unit legislation (January through July)

Council Member Hans Riemer’s zoning text amendment to liberalize county restrictions on accessory dwelling units (ADUs) provoked fierce opposition from Elrich and some civic activists. In other years, the legislation would have been either killed or watered down into oblivion. But this time, the council tweaked it and passed it unanimously. The legislation probably won’t result in huge waves of new ADUs, but the council took an important stand on the need to build more affordable units. The issue of affordable housing will come back over and over again during this term.

Grade: A

Public safety communications project (May through July)

When Elrich vacillated on placing the final two towers for the county’s long-standing public safety communications project even after a crippling outage, the council sprang into action. After the council threatened to override Elrich and write the towers directly into the capital project, Elrich ultimately conceded. The council would have received a better grade on this if it had not had its own history of delaying this project, but the council did the right thing in the end.

Grade: B+

Police chief search (July through September)

After the retirement of long-time police chief Tom Manger, Elrich nominated former Portsmouth police chief Tonya Chapman to succeed him. Chapman had more baggage than an airport terminal. Once the council made clear that Chapman did not have the votes for confirmation, the administration considered another nominee who had a pension benefit issue that probably required a legislative fix. That nominee did not fly either, so Elrich ultimately nominated an acceptable choice to many on the council, acting chief Marcus Jones, whom Elrich had previously rejected. This was truly historic stuff. Never before has any council imposed its will like this on an executive to ensure a high caliber nomination for one of the county’s most important positions.

Grade: A+

Fox subsidy (November)

I have written about this again and again. It could take a while, but this decision is going to come back to haunt the council.

Grade: F

Overall

Setting aside OPEB and corporate welfare for Fox, the council’s record is pretty decent on a number of issues. And the council was magnificent in forcing Elrich to hire a competent police chief. Year two should be more challenging, especially if the county’s lackluster economic performance forces tough choices on the budget.

Overall grade: B

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Zoning

County ReMARCs: County Executive Marc Elrich on Accessory Dwelling Units

The following is a detailed explanation and analysis by County Executive Marc Elrich of the major changes to zoning law proposed by Councilmember Hans Riemer:

Dear Resident,

There is a proposed amendment to the County’s zoning code that would fundamentally alter virtually all residential areas in the County now zoned for single-family detached homes. In a nutshell, ZTA 19-01, Accessory Residential Uses would delete several existing requirements that must be met by property owners who want to build an additional living unit on a lot zoned for a single-family detached dwelling.  Yet as I have traveled around the County, I’ve discovered that most residents are either unaware of the proposed zoning changes or may not have a clear understanding of what they are.

Accessory apartments, also known as accessory dwelling units (ADUs) are allowed today in virtually all residential zones in Montgomery County. They can be built by converting part of an existing home, building an addition, or in some zones by constructing a free-standing unit in the back yard. They can answer the need for additional housing options, whether for extended families or as a source of supplemental income that makes homeownership more affordable for more people.

Although I supported recent legislation intended to encourage more ADUs in the County, I have questioned whether ZTA19-01 provides the right framework for addressing our housing needs while maintaining the quality of life that has attracted so many people to our single-family neighborhoods. Despite the rhetoric that ADUs are a tool for affordable housing, it is highly unlikely that they will help the extremely low-income households (defined as 30 percent of the area median income) that most need affordable housing.

Here are some questions and answers about the ZTA as approved by the County Council’s Planning, Housing, and Economic Development Committee (PHED). I hope you will have time to read this and share your thoughts with me, your civic and/or community association, and with councilmembers prior to their review of the legislation, scheduled for mid-June.

What problem is ZTA 19-01 trying to solve?
Councilmember Hans Riemer introduced ZTA 19-01 to encourage the creation of more ADUs (Accessory Dwelling Units) in single-family neighborhoods throughout Montgomery County. He and others see them as a means of producing additional housing options, including but not limited to affordable housing. (However, there are no requirements to ensure affordability.) Councilmember Riemer has explained that ADUs can be an apartment over a garage, a basement apartment, or a “tiny house” on a side lot or back yard – a second, separate living unit on a single-family lot, with a full kitchen and bathroom, and accessed by a separate entrance.

Are ADUs, including “tiny houses,” already allowed in Montgomery County?
Yes, they are. They can be built in, or as an addition to, an existing home and as a detached unit on lots of one acre or more. There are 414 licensed ADUs in the County; 356 of them (86 percent) are in the County’s smaller-lot residential zones found in areas like Wheaton, Silver Spring, Aspen Hill, Bethesda, Kensington, Takoma Park, Colesville, and Germantown. There are also unlicensed ADUs, but the County does not know how many.

Didn’t the Council make changes to ADU requirements last year?
Yes. Until last fall, ADUs were approved via conditional use (formerly known as a special exception) – a complicated, time-consuming, and sometimes costly process. To ease the approval process and encourage more ADUs, the previous County Council amended the zoning code in October 2018, removing the requirement for conditional use approval and allowing ADUs as a “limited” accessory residential use that meets certain standards. This change means that a homeowner’s application for an ADU can be approved as long as the ADU meets the standard requirements for parking, size of the ADU, and distance from other ADUs.

Is ZTA 19-01 needed so that I can have a separate unit for my in-laws?
Probably not. In virtually every neighborhood, your in-laws can have their own dwelling unit within your home, and depending on the zone you live in, you can construct a detached unit if you meet the conditions mentioned above.  If your application for an ADU is denied because of parking or distance-separation requirements, you can apply for a waiver of those requirements through the process established in last year’s revisions to the zoning code. As a councilmember, I supported the changes made last fall because I believed they would provide more opportunities for ADUs without compromising the underlying intent of the County’s single-family zoning.

If the ADU approval process was just recently amended, why is this ZTA needed now?
That is a question I am wondering about myself. The Council made some important changes, but the changes are still new; they did not take effect until January 15, 2019 – the same day that additional changes were introduced via ZTA 19-01. While additional changes may be needed, such as adjusting the parking requirements, it makes sense to assess the effectiveness of the recent changes first and to do a better job of getting input from residents around the County about potential future changes. It also makes sense to have a companion bill that addresses related issues in the County’s code – issues that can’t be dealt with in a zoning text amendment.

Would ZTA 19-01 allow a detached ADU on any single-family lot regardless of size?
Yes. Current zoning regulations allow detached ADUs in certain “large-lot” zones on at least one acre. ZTA 19-01 would allow them in virtually all areas zoned for single-family detached dwellings, including areas where the average lot size is 6,000 square feet or less. This is a major Countywide change to single-family detached zoning, which currently allows homeowners to build an accessory structure in the back yard (i.e. a shed or other outbuilding) while ZTA 19-01 would allow a second, separate living unit.

What are the proposed size limitations for these detached ADUs?
Council staff summaries of the PHED Committee discussions refer to limiting the size to the least of  “50 percent of the gross floor area of the principal dwelling or 10 percent of the lot area or 1,200 square feet of gross-floor area.” It isn’t clear whether gross-floor area refers to the footprint of the principal dwelling or the gross-floor area of all levels of the principal dwelling. The detached ADU can be up to 20 feet (2 stories) high.  There is also a provision to allow an ADU up to 32 feet long (i.e. a trailer or manufactured home).

Will ADUs have an impact on already overcrowded schools?
If the intent of the ZTA is to encourage larger, family-sized units, it is possible that there will be an increase in the number of students. And although the owner of a newly built home must pay a school impact fee, a freestanding ADU for a family generates no fees.

Does ZTA 19-01 propose changing parking requirements?
Yes.  Under the current zoning code, if two off-street parking spaces are required for the principal dwelling unit, one additional off-street space is required for an ADU. Homeowners can request a waiver of this requirement if there is adequate on-street parking. ZTA 19-01 would eliminate the requirement for one additional off-street parking space if the property is located within one mile of a Metro station or within the boundaries of the City of Takoma Park.

What happens if I live on a street with little or no off-street parking and I’m less than a mile from the Metro?
Parking may get very difficult in your neighborhood since there is no requirement and no assurance that the additional residents will not have cars.

What are the parking requirements in neighborhoods that don’t have driveways?
A homeowner who wants to convert part of the principal dwelling or build an addition or separate ADU would be required to build a driveway with two off-street parking spaces. This is true under the existing zoning code and apparently does not change under ZTA 19-01. It isn’t clear whether this can be appealed through the waiver process.

Can my neighbor build an ADU and then turn it into an Airbnb?
Yes, after one year under the existing zoning code and under ZTA 19-01. There is no language that requires a property owner to get approval for this change.

Are there potential environmental impacts?
In some cases, yes. There shouldn’t be any if an ADU is created within an existing dwelling unit, but environmental impacts can occur if an addition or separate dwelling unit is built in a back yard. Land disturbance during construction and the resulting replacement of green space with hard (impervious) surfaces means that less stormwater can be absorbed. This can lead to changes in the amount, velocity, and direction of rainwater runoff. Also, ground disturbance and construction can lead to the removal of trees or impacts to their root zones. There are no provisions in ZTA 19-01 that address these issues, although other jurisdictions that allow ADUs have requirements to protect and preserve trees and control stormwater runoff.

Why haven’t I heard about ZTA 19-01 before receiving this email?
Most ZTAs go through the review process without a huge public outreach component, primarily because most deal with specific, fairly narrow changes to the zoning code. There was a public hearing for ZTA 19-01, and shortly after its introduction in January 2019 Councilmember Riemer held a “community policy forum” inviting anyone interested in “reforming” the County’s existing ADU regulations to attend; most forum attendees were enthusiastic supporters of the ZTA.   There were also three PHED Committee work sessions in March and April. For most residents, the County Council’s open meetings process is “inside baseball” – not something that they keep track of or follow on a regular basis. Recent comments from residents of the County’s suburban single-family neighborhoods indicate that very few were aware of these public discussions of the ZTA and are concerned because of its potential consequences. Some councilmembers have responded by reaching out to their constituents to get feedback on the proposed changes, but to my knowledge no other efforts have been made to expand public outreach so that County residents whose neighborhoods would be directly impacted by the proposed changes have the opportunity to weigh in on the recommended changes

Will ADUs provide affordable housing?
There is no specific language in this ZTA that assures that the rents for ADUs will be affordable; it is premised on the idea that the easier it is to add ADUs, the more housing there will be, and the price of that housing will be lower.  Unfortunately, there is no evidence that this is how rental prices for ADUs work, primarily because construction costs are high, especially for detached units. It is also possible that allowing two dwelling units on any lot will drive up the value of the property and other homes in areas of the County that now offer a rich supply of affordable housing in modest-sized homes.

What are some of the best practices in other areas that allow ADUs?
Some jurisdictions in the DC area and around the country are embracing ADUs, but not without standards, programs, and processes to ensure their successful assimilation into single-family neighborhoods. Here are some of the best practices my staff and I have reviewed:

  • Other jurisdictions have significantly smaller size limits (which may increase the likelihood that rents will be affordable);
  • Several have robust information programs, education outreach, and even financial support to help with the high cost of building an ADU;
  • Many have regulations on other issues – like stormwater management, tree protection, amnesty programs to encourage illegal ADUs to apply for licensing, design standards to encourage compatibility with the look and scale of the principal dwelling, a regular inspection regime, and incentives to keep ADUs from being converted from long-term to short-term rentals. Some of these could be addressed in ZTA 19-01; others could be wrapped into a companion bill that would revise relevant parts of the County code.

What changes will the full Council review in June?
The following provisions have been approved by the PHED Committee and will be reviewed by the full Council:

  • Remove the current requirement for one additional onsite parking space if a property is in the City of Takoma Park or within one mile of a Metrorail Line station;
  • Remove the minimum one-acre lot size for detached ADUs, thereby allowing them on any residential lot regardless of lot size – detached ADUs would be allowed in all residential zones including the smaller-lot R-60, R-90, and R-200 zones where they are currently not allowed (attached ADUs are allowed in all residential zones);
  • Allow a detached ADU that is up to 32 feet long;
  • Limit the size of ADUs located in the interior of a house to 1,200 square feet unless the proposed ADU is in a basement whose footprint is larger, in which case the ADU in the basement can match the larger footprint regardless of size;
  • Limit the size to the least of 50 percent of the gross-floor area in the principal dwelling or 10 percent of the lot area or 1,200 square feet of gross-floor area.
  • Delete the maximum size of an addition that can be used as an ADU (the current zoning code says that the maximum floor area used for an ADU in a proposed addition to the principal dwelling unit must not be more than 800 square feet if the proposed addition increases the footprint of the principal dwelling);
  • Allow an accessory structure built before May 31, 2012 to be used as an ADU without regard to setbacks if it was legally constructed and there is no increase to the footprint or height of the structure; if an existing structure violates the setback standard, a new window on any wall on the side of the setback violation may not be constructed;
  • Delete the distance requirement between ADUs;
  • Delete the requirement that a house must be five years old before creating an ADU.

As I’ve indicated, I believe it is important to establish a responsive, well-regulated, and fair approval process for ADUs for property owners seeking alternative housing options, whether to address multigenerational needs or generate a source of income to provide mortgage relief or allow seniors to age in place. However, this is not a “one-size-fits-all” County, and how we achieve these goals matters if we want to successfully integrate a larger number of ADUs into our single-family neighborhoods. This is where you come in.  If you have specific changes you would like to suggest or views you want to share about ZTA 19-01 or ADUs in general, please let me know by sending an email to Marc.Elrich@montgomeryCountymd.gov with “ADU” in the subject line. I also encourage you to share your views with councilmembers.

Thank you for taking the time to read this,

Marc Elrich
County Executive

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Montgomery County

Elrich Sends Pro-Business Signals – Anyone Listening?

Immediately after taking office as county executive, Marc Elrich confronted a budget dilemma. The way he handled it deserves far more notice that it has received.

Outgoing Montgomery County Executive Ike Leggett promised bond rating agencies that he’d move towards a reserve fund of 10% of the country budget. Increasing the county’s reserves provides evidence of fiscal prudence that bond-rating agencies like, so adherence to Leggett’s target helps preserve the county’s AAA bond rating.

But revenues for the current fiscal year so far have fallen short of projections. I don’t view this as due to wildly unrealistic projections by the outgoing executive or council. Projections are called projections and not certainties for a reason. Sometimes, we end up with more money than expected too.

The shortfall presented newly minted County Executive Elrich with tough choices. Elrich could have declared that the 10% reserves target was unnecessarily high and that he would not be bound by Leggett’s commitment. Alternatively, Elrich could have taken a wait-and-see attitude in expectation that the final revenues for the fiscal year will prove higher.

Elrich chose neither of these more expedient options. Instead, he made the tough choice and pledged to cut spending. By asking county agencies for a variety of options, Elrich also used it as an opportunity to do in a smart, policy-oriented way rather than a uniform across-the-board cut. In short, it’s a first small step towards reshaping country government.

In his first major decision, Elrich also acted in an inclusive way by bringing in Council President Nancy Navarro to discuss it in advance of the decision, though the Council will, of course, need to scrutinize Elrich’s independently developed proposal for cuts.

Business, taxpayers and the bond-rating agencies could hardly have asked for a more fiscally responsible approach. In his first move, Elrich sent a message that he intends to pursue strong, responsible fiscal management and work within fiscal constraints.

Throughout the campaign, Elrich repeatedly explained, at times to deaf ears, that he wants to reshape country government to make it more efficient. He understands that this is imperative if only because the county’s current fiscal path is simply unsustainable.

Moreover, Elrich wants to realize savings precisely because he wants the county government to do more. If the county maintains its current trajectory, that won’t be possible. Squeezing more out of residents isn’t really much of an option, as previous councils have already more or less maxed out the local income and property tax.

It’s a pity that the opinion pages that predicted an Elrich administration as dire for business and proper fiscal management haven’t paid more attention.

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