Maryland’s newest tax levy – know as the “rain tax” took effect July 1st 2013. The fee is a state-mandated fee property owners must pay the city or county in which they live in order to pay for projects that keep toxic storm-water runoff from polluting the Chesapeake Bay. The Rain tax affects all property owners – if your home, business or non-profit is located in Montgomery, Prince George’s, Frederick, Anne Arundel, Carroll, Charles, Howard, Hartford and Baltimore Counties and Baltimore City. How much you pay depends on the rate set by your jurisdiction and whether or not your property is exempt. Wonder how you will be affected? Below is a summary of how each county is handing this new Maryland rain tax levy:
When Montgomery County residents see the water quality protection charge on their property tax bill, it won’t be very different, as they already had a fee in place. In fact, the county insists that it will be less from last year’s charge.
Generally, the fee is $88.40 per ERU unit, which is 2,406 square feet. However, there are numerous tiers (Tier 3 is $88.40) for different kinds of property and depending on which tier the property falls in a property owner could end up paying a different price.
Detached homes, townhomes, and agricultural properties have seven tiers ranging from $29.17 to $265.20.
Commercial properties will pay $88.40 per ERU. So a property that has 3,150 square feet in impervious surface area would pay about $115.73. Nonprofit organizations (501 (c)(3)s) will pay no more than $132.60 on the lowest tier and no more than $2,033.20 on the highest tier.
The county has a plan in place to phase in payments for those assessed fees for the first time. Residents who have never received a WQPC bill before or “received a new impervious area increase to their WQPC bill from the 2012-2013 tax year” will pay 33% of what they were estimated to pay during a 3-year phase-in. So the second year they will pay 66% of their estimate, and in the third year the will pay the full estimate.
A flat rate of $372 per acre of impervious surface is proposed, with a fee-tier system for residential properties charged according to a home’s square footage.
Owners of small lots (up to 1,480 square feet) with impervious surfaces could pay about $33; medium-sized (2,470 square feet) could pay approximately $41 and owners of large residential lots (4,900 square feet) could pay about $62. The fees would be rolled into homeowners’ annual property taxes.
Frederick County responded to the tax by levying a tax of 1 penny ($0.01) on all properties.
Storm water utility fees for Anne Arundel County residents vary depending upon what tier they fall in. The fee is assessed annually. The County Council is still fiddling with some of the rates.
In Anne Arundel County, an ERU equals 2,800 square feet and is $85. There are three billing tiers.
The lowest tier (the R10, R15, and R22 zones), which includes residential properties, townhomes, and condominiums, pay $34, or about half of one ERU.
Single family home falls into the second tier (properties within the R2 and R5 zones) and residents within this category must pay $85, which is equivalent to one ERU. Non-residential properties, which would include businesses, would pay this amount too.
Rural agriculture, as the elements within the highest tier are called, are twice the amount as a single family home at $170. These are in the RA and RLD zones.
Carroll County has set aside $20 million in funding to pay their share of the levy, the majority of this money coming from diverting funds from county run storm water management projects to the state- mandated project. Taxes in Carroll County will not be raised.
A 43 flat fee was implemented for all property owners.
Howard County has set its fee for $15 per 500 square feet of impervious surface on all properties and has estimated it will take in $18 million per year as a result. For example, a single family home with 2,300 square feet of impervious area would pay $75.
Residential, commercial, industrial, nonprofit, private school, federal properties, vacant properties with impervious surfaces will be subject to the fee.
But the county will determine how much impervious surface area on a property through a computer program that analyzes existing aerial photography.
In the cases of townhomes and condominiums, the county will bill the appropriate owner of the impervious surface area, whether it is a homeowners association or it is divided equally among joint owners.
Initially, Harford County residents will only have to pay a tenth of what they will have to pay in following years. When tax bills come around, residents will only have to pay $12.50 for the phase-in stage. But afterward, the rate will rise to $125.
It’s basically the same for businesses and apartments.
For the first year, they will pay 10% of what they would pay on subsequent years, or $0.70 per 500 square feet. Afterward, owners of those properties can look to pay $7 per 500 square feet, but not until after the initial phase-in.
Credits are also very generous.
Residents can get virtually a full-refund of their payment (100% credit) back if their property undergoes “remediation projects.” Making use of rain barrels, brightening the outside of a home with a garden, and planting trees along waterways are some examples of how to get some money back.
In Baltimore County, one ERU equals 2,000 square feet but only commercial property owners use the full ERU rate, which is $69.
However, no one type of property is charged at exactly same rate as another property. A detached single family home has a fixed rate of $39. An attached single family home, such as a townhouse, has a fixed rate of $21. All residential property have caps regardless of size.
And institutional property owners–nonprofits–have to pay $20 per ERU.
Baltimore County expects to generate $24,540,000 from this, according to a Baltimore County Department of Environmental Protection and Sustainability document. While credits are given, only nonprofits and commercial property can receive credits.
In an example within the document, the costs for an apartment complex covering 25.4 acres of land is $18,285. That’s because the buildings and the pavement that makes up the property totals 531,302 square feet, or 265 ERUs.
In a different example, the cost for a big box retail property that covers 25.8 acres of land is $27,807. This hypothetical property had 403 ERUs.
Levied quarterly, the Baltimore City stormwater implementation fee (see page 12) of $18 per ERU will appear on individual water bills or “stormwater only” bills for people who don’t use water from the city. The bill is still going through the City Council process.
Each ERU equals 1,050 feet.
However, the fee does change depending on one of the three tiers a property would fall under.
Those that fall into the lowest tier would pay $12 per quarter; the middle tier $18 per quarter; and the upper tier $36 per quarter. This means residents would pay between $48 and $144 annually.
“Proposed stormwater fees being considered by Baltimore City would result in the city having the highest so-called ‘rain tax’ on businesses in the state, according to experts who are following efforts in ten Maryland jurisdictions to implement the fees required by state legislation,” wrote Fry.
According to a Department of Public Works document, non-single family residential properties (non-SFR) will shoulder 67% of the total contribution to the stormwater fund, although they make up 11.6% of the properties distributed because “those properties that have large amount of these hard surfaces [impervious surfaces] will pay more in fees.”
Non-single family residential properties include “multi-family residential”, commercial, industrial, institutions, and non-profit/exempt organizations, and vacant land.
Background about the Rain Tax
In April, Governor Martin O’Malley signed a new law that enacted a “storm water management fee” on ten of 24 local jurisdictions within the state. The bill was passed in response to a decree by the Environmental Protection Agency (EPA) formally known as the Chesapeake Bay Total Maximum Daily Load, which identified mandatory reductions in nitrogen, phosphorus, and sediment that damage the Chesapeake Bay. These pollutants are primarily found in drainage run-off and fertilizers.
Maryland, New York, Pennsylvania, Virginia, West Virginia and the District of Columbia must comply with these new environmental standards, but each state is free to find its own way to fund the relief efforts. Maryland is the only state that has instituted a levy to meet the EPA’s standards.
While a “tax” is a charge levied with the purpose of generating revenue, a “fee” is a charge levied for the purpose of recovering costs incurred in providing a service to the payer. So while the legislature as taken to calling this levy a fee, it is rightly categorized as a tax, because the revenue goes toward drainage systems, which everyone in the general public benefits from—not just payers of the levy.