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The ‘Rain Tax’ Explained

June 2013
Craig A. Ward President Frederick Ward Associates

Craig A. Ward
Frederick Ward Associates

Anyone following the news recently has read ongoing discussion and debate over the Stormwater Remediation Fee, also known as the “Rain Tax.” This fee was mandated by state law in 2012 through HB 987, formally titled “Stormwater Management – Watershed Protection and Restoration Program.” Quite short by legislative standards, the bill essentially did two things: it identified the 10 jurisdictions that fall under the bill, and it obligated those jurisdictions to create a fee and fund, based on paved (impervious) surfaces, to pay for stormwater quality improvements in the jurisdiction. The deadline to do so is July 1, 2013.

The basis of this requirement is the pending renewal of stormwater discharge permits required of these jurisdictions, known as MS4 Permits, issued by Maryland Department of the Environment under EPA’s NPDES program. [MS4 – Municipal Separate Storm Sewer System, NPDES – National Pollutant Discharge Elimination System]. These permits are renewed every five years, and in this update the jurisdictions are being required to construct water quality measures to treat 20 percent of the unmanaged impervious surfaces within their County or City. These measures can be stream restorations, stormwater pond retrofits, infiltration systems, bio-swales, or other environmental enhancements. Needless to say, 20 percent is a lot of pavement, and these measures are expensive. These requirements are a key element of the Watershed Implementation Plan (WIP) strategy to meet federal water quality standards in the Chesapeake Bay by 2025.

The bill gave the Counties and Baltimore City very wide latitude on how to calculate and impose the fee. The theory is that each County would develop an improvement program to treat the 20 percent, calculate the cost of fully completing that program within the five-year permit period, then spread that cost over the property owners in proportion to the amount of paved areas each property contained.

The bill really didn’t say, however, that each jurisdiction took their own approach, with very wide results. The bills in the 10 jurisdictions are in various stages of adoption with some passed, some pending, and some that have not seen the light of day yet (as of this writing). Proposed annual fees on residential properties range from one cent in Frederick County (essentially thumbing their noses at the State), to $261 in Montgomery County, with most in the $30 to $90 range. Annual fees on commercial properties range from one cent in Frederick (with next lowest being $452 per acre of impervious in Charles County) to as high as $2,987 per acre per year in Baltimore City, with most being around $1,500 per acre.

As one can imagine, the political and community response to this new “Rain Tax” has been very strong and (mostly) very negative. This resulted in some rate reductions, especially for non-profits and farm properties, some phasing in of the fee over a year or so, and varied approaches on applying credits to the fee for existing or newly installed water quality measures on a property. The reaction has also caused some high-ranking members of the General Assembly to suggest possible review and revision of the bill in the 2014 Legislative Session.

One important point is that it is unlikely that any of these fees will generate enough revenue to actually achieve the 20 percent treatment requirement in the next five years. In Harford County, for example, it was initially estimated that $30 million per year would be necessary to comply, resulting in a $400 per year fee for residential properties. This was reduced to $125 per year upon introduction of the bill and amended before passage to only impose 10 percent of the fee, or $12.50, for the first year, generating only about $1 million.

The “Rain Tax,” like many provisions of the WIP strategy, is expected to be a work in progress for some time with fee increases likely. Watch this space.

This is one of a regularly recurring column by Craig A. Ward on the environment and land use in Maryland. Ward is a Registered Professional Engineer and Certified Planner and is the President of Frederick Ward Associates, a civil engineering and architectural design firm in Bel Air. Ward has been involved in State and local land use and environmental policy and design for over 25 years. He can be reached at I95