Here’s what you need to know about Montgomery County’s proposed growth policy

Montgomery County’s housing moratorium policy, along with many other policies affecting development, could change with the quadrennial update to its growth policy, known as the Subdivision Staging Policy (SSP).

The SSP’s purpose is to create mechanisms to test whether public facilities can support future growth. Montgomery Planning staff published its recommendations for the 2020 SSP update on May 21. The working draft has nearly 40 recommendations for schools, transportation, and taxes, but here are the top five which would result in the most significant changes:

1. Eliminate automatic housing moratoria throughout most of the county

Under current policy, if a school or school cluster reaches 120% capacity, the affected area goes into a housing moratorium, meaning that the Planning Board cannot approve new residential development.

Since July 2019, 12% of Montgomery County has been under a housing moratorium, including large swaths of Silver Spring, North Bethesda, and Wheaton — some of the most desirable areas of the county, with premier access to major transit and job hubs. The areas under automatic moratorium are reevaluated every year based on current school capacities.

Perhaps most importantly, stopping development does not actually solve school overcrowding. Less than 30% of the county’s school enrollment growth can be attributed to new development. In reality, the vast majority of new students come from “neighborhood turnover,” or single-family homes without school-aged children being sold to young families.

For example, there were six school clusters at-risk of entering moratorium in 2019. Enrollment in those clusters grew by 4,157 students in four years, but only 184 of the new students lived in new multifamily buildings or townhomes.

Instead of solving school overcrowding, the moratorium on new housing weakens Montgomery’s ability to deliver on its regional housing targets. The Montgomery County Council has set a goal to build 10,000 housing units above the current regional forecast, with 75% affordable to low- and middle-income households.

The moratorium also stifles the county’s moderately priced housing program, which relies on new development to provide permanently below market rate housing; hinders economic growth; and encourages sprawl by pushing new development to parts of the county that are not under moratorium.

Furthermore, the moratorium is in part intended to encourage the county to invest in expansion projects for areas with overcrowded schools, but this has meant that schools with substandard facilities that are not at risk of moratorium have been overlooked. In effect, wealthier areas of the county are seeing school investment, but less wealthy areas with less crowded schools are seeing less investment.

Now, the housing moratoria could be eliminated nearlyeverywhere.

Planning staff recommends an approach that would eliminate automatic housing moratoria everywhere except for Clarksburg. Their approach groups neighborhoods into School Impact Areas based on the character of their growth and that growth’s impact on schools. The recommended School Impact Areas are:

• Greenfield Impact Areas: Areas with high enrollment growth due largely to high housing growth in predominantly new single-family units
• Turnover Impact Areas: Areas with low housing growth where enrollment growth is largely due to turnover of existing single-family units
• Infill Impact Areas: Areas with high housing growth in predominantly multifamily units, which generates few students on a per unit basis

Instead of automatically going into moratorium, development applications within Turnover and Infill Impact Areas would require special review by the Planning Board and “Utilization Premium Payments” (more on those later).

2. Reduce the school impact tax to 100% of the cost of a seat

Developers have to pay taxes to offset their project’s impact on schools and transportation. These are called impact taxes. Montgomery County’s school impact tax is calculated as 120% of the cost of each additional student seat a new housing unit generates — one of the highest school impact taxes in the region, adding between $6,113 to $27,598 to the cost of every new housing unit. This tax is passed onto consumers through increased housing prices.

Montgomery Planning recommends lowering the tax from 120% of the cost of a seat to 100% and lowering it even further in Activity Centers to 60%. Activity Centers are locations defined by the Metropolitan Washington Council of Governments as “existing urban centers, traditional towns, and transit hubs” where the majority of the region’s growth should be focused. Notably, some of the identified “centers” in outer areas lack transit and are overly large.

The 120% cost calculation would be kept for the county’s Agricultural Reserve in order to actively discourage growth on the protected land.

This recommendation recognizes that impact taxes are a tool to either encourage or discourage economic development. In some cases, it may be worth lowering impact taxes (a one-time payment) in order to expand the overall, long-term tax base.

Montgomery County Activity Centers. Map from Montgomery Planning.

3. Charge developers more for new housing in areas with overcrowded schools

This recommendation would increase the school impact tax in areas with overcrowded schools as an alternative to an automatic housing moratorium. Instead of not being allowed to move forward at all, developers would have to pay “Utilization Premium Payments.”

For elementary schools, the premium payments would be 25% of the standard impact tax for the School Impact Area. For middle and high schools, the payment would be 15 and 20% respectively. However, if multiple schools serving the project site exceed the given threshold, then payments would be required for each.

Given that the general impact taxes were recommended to be lowered to either 100 or 60% in the aforementioned recommendation, this would mean that the highest premium school impact tax outside of an Activity Center would be 160% of the cost of a seat and the highest in an Activity Center would be 120%. In the Agricultural Reserve, the tax could go as high as 180%.

The Utilization Premium Payment concept is a rebranding of the former School Facility Payments, which were abandoned during the 2016 SSP update in favor of higher school impact taxes. But similar to the School Facility Fees of the past, Utilization Premium Payments aren’t likely to significantly grow the pool of money available for school projects. Even after the 2016 increase, school impact fees only funded approximately 8% of the Montgomery County Public Schools (MCPS) budget in both 2019 and 2020.

4. End impact tax exemptions for downtown Silver Spring

Projects in the Silver Spring central business district get special impact tax exemptions due to its status as a former Enterprise Zone, a geographic designation that provides tax incentives and credits to underserved areas to encourage growth. Between 2006 to 2016, this exemption only cost the county $5.8 million.

Planning staff argue that since Silver Spring would have the lowest school and transportation impact taxes under new recommendations, this exemption should be removed and would not hinder development. The 2016 SSP public hearing draft made the same proposal to no avail.

5. Increase the recordation tax

A recordation tax is a fee on the sale of a property, paid by the buyer. In Montgomery County, the tax is used to fund school projects, rental assistance, other capital projects, and the general fund. In 2019, the tax generated over $60 million for schools. Since the majority of new students come from neighborhood turnover, it makes sense to target home purchases to fund school capacity projects.

The proposed increase is progressive — an 11 to 14% boost for homes priced $300,000 to $1,000,000; a 26% hike for $1 million homes; and a 31% rise for $2 million homes. Increased revenue would go to school construction and rental assistance for low-and moderate-income households.

The county raised recordation taxes in 2016 to boost funding for schools, which wasn’t without controversy. The current council has been vehemently opposed to any tax increases. Increases to both the Recordation Tax and adoption of Utilization Premium Payments could lead to marginal declines in home prices or end up being passed on to buyers and renters.

But wait, that’s not all

Other recommendations in the schools element include changes to the student generation rate calculations, annual school test, moratoria exemptions, impact tax calculations and exemptions, and more.

Notably, I haven’t brought up transportation yet. Changing sprawl-encouraging traffic tests was a major focus of the 2016 SSP update — this time the focus is on (you guessed it) schools. Still, there are transportation recommendations worth mentioning.

Primarily, staff recommends adjustments that better incorporate the county’s Vision Zero goal to eliminate traffic deaths. This includes increasing intersection delay standards along future Purple Line and Bus Rapid Transit corridors, and removing traffic tests around Metro stations altogether. These adjustments would make a big difference in making streets safer.

No mention of school boundaries

The most controversial issue in the county right now is a debate over whether to change (or even study the possibility of changing) school boundaries to better balance capacity, diversity, and proximity. This has resulted in an extremely contentious school board race.

Although the Board of Education has ultimate authority over school boundaries, the issues of school boundaries and capacity are closely linked. MCPS has enough seats for all of its students, but those seats are not evenly distributed across the county because of how boundaries are drawn. Overcrowded schools neighbor schools with open seats.

The staff recommendations make no reference to this potential solution to capacity challenges.

Growth policy during a recession

As with the rest of the country, the future of Montgomery County’s economy is uncertain at best due to the COVID-19 crisis. In the near-term, the county projects up to $600 million in lost revenues over the next two years, but the long-term severity of the pandemic-induced recession could be felt for years to come. New development — and the increased property and business taxes it generates — could be a life preserver.

The updated growth policy must first be approved by the Planning Board, but authority ultimately lies with the County Council, which is required to adopt a new SSP by November 15, 2020.

You can send the Planning Board an email here (via the Coalition for Smarter Growth) and sign up to testify at the June 11th public hearing here.