Eastern Diversified Properties, Inc. v. Montgomery County

• Decision Date: 07 March 1990
• Docket Number: No. 97,97
• Citation: 319 Md. 45,570 A.2d 850
• Parties: , 58 USLW 2527 EASTERN DIVERSIFIED PROPERTIES, INC. v. MONTGOMERY COUNTY, Maryland Sept. Term 1989.
• Court: Maryland Court of Appeals

Page 45

319 Md. 45

570 A.2d 850, 58 USLW 2527

EASTERN DIVERSIFIED PROPERTIES, INC. v. MONTGOMERY COUNTY, Maryland

No. 97 Sept. Term 1989.

Court of Appeals of Maryland.

March 7, 1990.

Stephen C. Hosea (Robert J. Kim, McNamee, Hosea, Jernigan & Scott, P.A., all on brief), Greenbelt, for appellant.

A. Katherine Hart, Sr. Asst. County Atty. (Clyde H. Sorrell, County Atty., both on brief), Rockville, for appellee.

Argued before MURPHY, C.J., ELDRIDGE, COLE, RODOWSKY and ADKINS, JJ., THEODORE G. BLOOM, Judge of the Court of Special Appeals (Specially Assigned), and CHARLES E. ORTH, Jr., Associate Judge of the Court of Appeals (retired), Specially Assigned.

MURPHY, Chief Judge.

The question presented is whether a "development impact fee," imposed by ch. 49A of the Montgomery County Code (1984) for road construction, is a valid regulatory fee under the County's home rule power or is a tax which the County is without authority to impose.

I.

Eastern Diversified Properties, Inc. (Diversified) owns a parcel of land in Montgomery County upon which it proposes to construct an automobile sales and service facility containing 53,930 square feet of retail space and 9,444 square feet of office space. As required by law, the Maryland-National Capital Park and Planning Commission approved Diversified's proposed subdivision plat. Thereafter, Diversified filed an application for a building permit with the Montgomery County Department of Environmental Protection, which was approved upon condition that Diversified pay a development impact fee of $118,006. Diversified appealed the imposition of the impact fee to the County Board of Appeals (the Board), as authorized by § 49A-11 of the County Code.

After a hearing, at which it was determined that the facts were not in dispute, the hearing examiner reviewed the provisions of ch. 49A. He said that the purpose of the impact fee was "to regulate growth by obtaining partial funding of construction costs for roads which the County, based upon the cumulative impact of new development, has determined will be necessary." He determined that the impact fees are imposed at the building permit stage without exception as to the type of development covered by ch. 49A and apply to all new construction within two designated areas of the county, namely Germantown and eastern Montgomery County (where Diversified's property is located). He concluded that the formula for determining the fee under ch. 49A was designed "to assess a fair pro rata share for development" and restricted the fees to road construction uses which are "reasonably related to the development from which they are derived."

The hearing examiner determined that the impact fee was not a tax; that it was not collected for general revenue purposes, but was restricted to specific road improvements in specified areas of the County. He noted that the fees are not compulsory, like a tax, but are assessed only when a building permit is sought and then only for the sole purpose of making local road improvements "which directly benefit the property from which the fees are derived." The hearing examiner held that the impact fees were part of the development regulatory process and were imposed pursuant to the County's home rule powers. In determining that the impact fees did not constitute a tax, he reasoned that ch. 49A establishes a scheme "regulatory in nature and designed to achieve a definite and just plan that will partially assist in the construction of roads, the need for which is directly attributable to the new development that is the source of the impact fee." The hearing examiner thus recommended that Diversified be required to pay the development impact fee.

The Board adopted the hearing examiner's recommendation by resolution dated May 12, 1988. Thereafter, Diversified appealed to the Circuit Court for Montgomery County which affirmed the Board's decision. After Diversified appealed to the Court of Special Appeals, we granted certiorari prior to argument in that court to consider the issue of significant public importance raised in the case.

II.

As a result of the rate of growth in Montgomery County, the County Council, in enacting ch. 49A (entitled "Development Impact Fees for Major Highways") recognized a need for road construction in "planning policy areas." § 49A-2. To finance this construction, it imposed impact fees on new development within the policy planning areas. § 49A-4. ¹

Impact fees are to be collected from building permit applicants prior to the issuance of a building permit in the designated areas. Fees are calculated based upon the type of structure to be built and, in certain instances, upon the total square footage of the structure. §§ 49A-6 and A-12. The share of the costs of the highway construction to be paid by new development in the two established impact fee areas is 50% for Germantown and 44.75% for eastern Montgomery County. The projected total funds to be provided by impact fees for both areas is $108,723,000. ² § 49A-13. The balance of funds necessary to pay for the highway construction is to be provided from public funds. § 49A-2(f).

Every two years the County Executive is required to prepare a report on development impact fees for the County Council, and to make recommendations regarding the program. § 49A-7. Impact fees are restricted to funding road construction in the area from which they are collected, either the Germantown or eastern Montgomery County area. § 49A-8.

Chapter 49A-3 recites that the "development impact fee for impact highways" is imposed pursuant to authority granted by § 101 of the county charter. This section of the county charter invests the County Council with all the legislative powers conferred upon the County by the State Constitution and by the General Assembly. In enacting the development impact fee, the County stated that it was "exercising its home rule powers, including its police power to ensure and coordinate the provisions of adequate transportation facilities with new development so that the public health, safety, and welfare are enhanced, traffic congestion is lessened, accessibility is improved, and economic development is promoted." § 49A-3(b).

III.

As subdivisions of the State, counties may only act when specific grants of power are conferred upon them. Howard County v. Matthews, 146 Md. 553, 561, 127 A. 118 (1924). They do not have the power to tax on their own authority, but may do so only if the power has been granted by the State. Schneider v. Lansdale, 191 Md. 317, 61 A.2d 671 (1948); 4 Antieau, Local Government Law, § 41.00 (1989); 4 Sands & Libonati, Local Government Law, § 23.02 (1989). As a charter county exercising home rule powers, Montgomery County is governed by the Express Powers Act, Maryland Code (1987 Repl.Vol.), Article 25A, § 5. This section was enacted pursuant to § 2 of Article XI-A of the Maryland Constitution and enumerates the powers granted to charter counties. ³ The exercise of legislative home rule powers by a charter county is thus "subject at all times to provisions of the Constitution and general law, and is limited to those matters allocated by the express powers which the Legislature has delegated under Article 25A of the Annotated Code." Ritchmount Partnership v. Board, 283 Md. 48, 57, 388 A.2d 523 (1978). See also Mont. Citizens League v. Greenhalgh, 253 Md. 151, 252 A.2d 242 (1969).

Section 5(O) of Article 25A entitled "Assessments, Levy and Collection of Taxes" expressly authorizes charter counties to impose a property tax; it does not, however, grant general taxing powers to charter counties. Mont. Co. Bd. of Realtors v. Mont. Co., 287 Md. 101, 106-07, 411 A.2d 97 (1980); Mont. Co. v. Md. Soft Drink Ass'n, 281 Md. 116, 129-30, 377 A.2d 486 (1977); Reinhardt v. Anne Arundel Co., 31 Md.App. 355, 373, 356 A.2d 917, cert. denied, 278 Md. 731 (1976); Griffin v. Anne Arundel County, 25 Md.App. 115, 126, 333 A.2d 612, cert. denied, 275 Md. 749 (1975).

Section 5(S) of Art. 25A grants broad powers to charter counties "to pass all ordinances ... not inconsistent with the provisions of this article or the laws of the State, as may be proper in executing and enforcing any of the powers enumerated in this section or elsewhere in this article, as well as such ordinances as may be deemed expedient in maintaining the peace, good government, health and welfare of the county." We have characterized § 5(S) "as a broad grant of power to legislate on matters not specifically enumerated in Art. 25A," in pursuance of which necessary and beneficial ordinances may be enacted consonant with the general powers of the charter county; moreover, we have recognized that § 5(S) must be liberally construed to afford wide discretion to charter counties in the good faith exercise of their police powers in the public interest. Greenhalgh, supra, 253 Md. at 161, 252 A.2d 242. See also Ritchmount Partnership, supra, 283 Md. at 57, 388 A.2d 523 and County Council v. Investors Funding, 270 Md. 403, 411, 312 A.2d 225 (1973). And we have said that the police power delegated to charter counties by § 5(S) "includes the power to regulate private business to the extent necessary to promote the public health, safety, morals, and welfare." Prince Geo's Co. v. Chillum-Adelphi, 275 Md. 374, 382, 340 A.2d 265 (1975).

IV.

Diversified argues that the impact fee is in actuality an excise tax which Montgomery County is without authority to impose. It maintains that the dominant purpose of the impact fee is to raise revenue to construct highways for use of the public at large. It suggests that no specific correlation exists between the construction of the off-site highway and the property being developed. In this connection, Diversified claims that the impact fee is not sufficiently earmarked under the provisions of ch. 49A to establish a nexus of the type legally required to substantiate the charge as a regulatory fee. It says that the eastern ...