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New Stormwater Fees in Maryland

During the 2012 legislative session, the Maryland General Assembly passed HB 987, a bill which mandated that the ten separate EPA-licensed storm sewer system (“MS4”) jurisdictions in Maryland (Baltimore City and nine counties- Anne Arundel, Baltimore, Carroll, Charles, Frederick, Harford, Howard, Montgomery, and Prince Georges Counties) create dedicated local Watershed Protection and Restoration Funds, funded by stormwater remediation fees to generate the revenue necessary to comply with each jurisdiction’s permit requirements. HB 987 required that the programs be adopted and implemented by July 1, 2013. The response of the ten affected jurisdictions to the requirement to adopt a stormwater fee system is currently very "fluid" and bears watching. How these jurisdictions will respond, and the opportunities they will provide to reduce these fees could have a significant impact on the pocketbooks of owners, landlords and tenants.

Dubbed a “rain tax” by its critics, the legislation imposes the stormwater remediation fees on all property owners except for property used for a public purpose and owned by the state, a unit of the state, a County, a municipality or a regularly organized volunteer fire department. The fee amount must be based on the share of stormwater service related to the property and provided by the city or county, and in general will be calculated on the area of impervious surfaces (parking lot, roof, etc.) on each property.

The ten local jurisdictions are afforded wide latitude to establish policies and procedures (which must be approved by the Maryland Department of the Environment) for the stormwater fees, and to extend fee credits for actions taken by a property owner to improve the quality or reduce the quantity of stormwater discharge from the property.  Each jurisdiction is approaching the structure of the fee credit system differently, and as a result the systems adopted or being contemplated vary from jurisdiction to jurisdiction.  In the jurisdictions with legislation pending, credits of between 45% and 80% of the total fee are being proposed.

Several of the ten jurisdictions, including as Anne Arundel, Baltimore, and Howard Counties, have recently adopted the required stormwater fee legislation. Anne Arundel’s County Executive Laura Neuman, vetoed that county’s version of the so‐called rain tax on April 25, making the county the first jurisdiction to take action against the controversial state‐mandated stormwater management fee. Although that veto was overridden by the County Council on May 1, the Council is considering certain changes to phase in the impact of the fees.  Baltimore City is holding hearings on proposed legislation and draft regulations. It remains unclear as to when the others will bring forward proposals for adoption. 

While final action on local stormwater fee legislation has not been completed in several jurisdictions, it is clear that in many cases the fees will be substantial for owners of commercial properties. As stormwater fee assessments are issued, commercial property owners will need to review them closely to determine whether they accurately calculate the relevant impervious surfaces. If not, there will be opportunities to appeal these assessments. In addition, commercial property owners should be aware of and understand the details of the fee credit systems which are adopted, in order to ameliorate the effects of these fees. Landlords of commercial properties should review their leases to ensure that these fees can be passed through to tenants under the lease terms. Tenants of commercial properties should similarly review their lease terms to carefully monitor landlord actions with respect to these fees and to ensure that landlords are taking all appropriate steps to reduce these fees.

Matthew L. Kimball is a partner in the firm‘s Real Estate Department, and is the co-author of "Property Manager‘s Guide to Commercial Real Estate Law" published by the BOMI Institute. For additional information please contact him at 410-783-6354 or mlkimball@nilesbarton.com.

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