When lawmakers convene in Annapolis next week, developers around the state will tighten the grip on their wallets.
As the state’s budget woes continue and an expensive plan with a 10-year timetable for new federal Environmental Protection Agency requirements to clean up the Chesapeake Bay begins in full, developers and their lobbyists worry that increases in fees and a possible new tax on impervious surfaces may mean higher costs.
Last year, new storm water management regulations limiting sediment and nutrient pollution translated into mandated infrastructure upgrades in large developments, costing up to millions more for large projects.
This year, Maryland’s compliance with the total maximum daily load requirements under the Clean Water Act means extra costs are in the offing for developers, including a possible increase in the Chesapeake Bay restoration fee, said Tom Ballentine, executive vice president for the National Association of Industrial and Office Properties.
The state’s tab for such work is about $10 billion over the next 10 years, Ballentine added.
“There’s no budget to pay for that, whether it’s this year or next,” he said. “The solution is unapparent, so it’s hard to see how those revenues will materialize.”
Dawn Stoltzfus, spokeswoman for the Maryland Department of the Environment, said the agency is not proposing any increases in fees relating to total maximum daily load requirements this year.
Stoltzfus said the department already has dedicated funding for half of the $10 billion tab based on estimated costs to upgrade sewage treatment plants, and “we’re not going to know” the remaining financial needs because of the lengthy timetable.
“There are a series of 50-plus strategies to meet the required reductions in nitrogen sediment and phosphorus,” she said. “And as we work on certain types of programs and new efficiencies and basically each of the 50 strategies … it’s something we’re going to be dealing with over the years to come.”
Industry insiders say a possible new tax on impervious surfaces such as sidewalks and curbs may materialize this year as Gov. Martin O’Malley looks to close a $1.6 billion state budget gap.
And the possibility of cutting or limiting tax incentives for developers, long a flashpoint in lean economic times, could also be up for debate in the upcoming session.
Anirban Basu, a Baltimore economist, said incentives such as Tax Increment Financing, or TIF, and payments in lieu of taxes, or PILOTS, are necessary for economic development, yet controversial because they stall local property tax collections on big developments, often for decades.
Cities such as Baltimore rely on TIFs and PILOTs, Basu said, to provide creative financing alternatives to developers.
“They often become necessary because the basic tax code is so flawed,” Basu said, of the tax incentives, predicting that they will be a topic in the General Assembly this session.
“It is very political,” he said. “But I’m afraid that some legislators have the tendency to look at one side of the issue and during a period of fiscal belt-tightening, one of the easy things to say and do is to eliminate or reduce available funding for TIFs.
“This would be depicted as being fiscally prudent. However, the state still faces a 7.4 percent unemployment rate and the implication is that the state and its citizenry would benefit from construction.”