Please ensure Javascript is enabled for purposes of website accessibility

Policy group: Some jurisdictions going about implementing rain tax the wrong way

A Maryland policy think tank says new stormwater fees imposed by Baltimore and nine counties could theoretically help reduce development’s negative impact on Chesapeake Bay water quality.

But the way some jurisdictions are imposing the fee — which researchers say is really a “Pigouvian tax,” meaning a charge intended to counter negative impacts of certain activities — are negating the mitigating value of what’s been derided by opponents as a “rain tax.”

Some jurisdictions, for example, have based each homeowner’s quarterly fee on the amount of impermeable surface on a property. That is, the more area on a property that doesn’t absorb rainwater, the higher the owner’s stormwater fee will be.

Such a fee structure effectively discourages development that does not reduce runoff, wrote John J. Walters of the Maryland Public Policy Institute in a report issued last week. But some jurisdictions — including Howard County and Prince George’s County — are charging residential property owners flat fees, the report says, “thereby dampening the useful disincentives of a Pigouvian tax.”

Thomas A. Firey, a senior fellow at the Maryland Public Policy Institute and editor of Cato Institute’s Regulation magazine, said some counties missed the mark when they developed their fee structures.

“It’s really important to understand, at least in theory, why this could be good, but why a lot of this is getting screwed up,” said Firey, who edited Walters’ report.

Implementation went especially awry in Baltimore, the report says, where city officials have imposed one of the highest fees on residents and business owners in the state, causing Greater Baltimore Committee President Donald C. Fry to proclaim this spring that the policy was “not an example of government partnering with business.”

Even after proposed fees were reduced by the City Council, the impact on Baltimore residents and businesses was greater than in the counties that surround the city.

“By setting the tax rate higher in the [city] than in any surrounding counties, Baltimore city is effectively incentivizing further development in the Maryland suburbs and sabotaging its own efforts at improving the bay — or rejuvenating the city,” the report argues.

If Baltimore went about implementing its fee in the wrong way, Carroll County — in an act of defiance — may be acting in the right way, Firey said. The county has refused to impose a fee, instead reallocating money already being collected from taxpayers.

“That’s encouraging, because they’re trying to prioritize,” Firey said. “We feel that Annapolis doesn’t have enough respect for the things that we try to do privately with our money, and we really need Annapolis to do a better job of prioritizing things that are important” instead of raising taxes or fees.

The stormwater fee was mandated by House Bill 987, which was approved by the General Assembly in 2012 in response to federal clean water requirements. Money collected by Baltimore and nine counties is supposed to go toward stormwater treatment upgrades to reduce pollutants that run into the Chesapeake Bay when it rains.

State property and federal property is not subject to the fee, but lawmakers and Gov. Martin O’Malley are considering changing the law so that the state would contribute some money to stormwater upgrades.