2012 State Legislative Update

Legislative Committee Report - 2012 Maryland Legislative Session

On April 9th at midnight, the 2012 Session of the Maryland General Assembly was scheduled to adjourn Sine Die. Normally, that would end the legislative business for the remainder of this calendar year.   For the first time in 20 years, however, the Governor will have to call a Special Session of the legislature to address the failure, in this year’s regular Session, of the House of Delegates and the Senate to agree on an appropriate balance of revenues and expenditures.

It is not uncommon for the House and Senate to take different approaches on broad policy issues related to revenue-raising (taxes and fees) and State spending. This year, however, the Senate was insisting on the passage of gaming legislation as a condition to an overall budget agreement. The House was unable to marshal sufficient votes for the gaming bill (it was nearly 20 votes short) and the Senate eventually refused to participate in a House effort to extend the Session in order to allow further negotiation. Anticipating this possibility, both bodies had earlier passed a budget bill that was not dependent on any additional revenue. Instead, approximately $500 million would come from cuts in State spending. This “doomsday budget” could have serious and far-reaching implications if it actually goes into effect on July 1st of this year.

That night and the next morning, Governor O’Malley publicly expressed his deep unhappiness with this result and laid the blame at the feet of both legislative bodies. It appears that a Special Session will be called soon, perhaps within the next four to six weeks. Before the Session is called, it will be necessary for legislative leaders (and perhaps the Governor’s office as well) to collect the necessary votes to both pass the gaming legislation and enact the revenue-raising measures necessary to preclude implementing the doomsday budget.

Senate President Mike Miller has expressed his opinion that this could be accomplished in a one-day Special Session, or possibly two days. It is important to remember, however, that during a Special Session any legislator is free to introduce any legislation on any subject. In addition, the Governor could try to revive one or more of his failed initiatives from the regular Session. Two such initiatives that come to mind are some form of gas tax to raise funds for the Transportation Trust Fund, and his initiative to establish an offshore wind project.

Taxation

As part of the Administration package, the Governor proposed a recordation tax on indemnity deeds of trust this year. It’s an issue that BOMA has seen before, first with the application of the State transfer tax to the so called “controlling interests” in real estate corporations, and now with the taxation of IDOTs. BOMA and other commercial real estate organizations have been able to defeat such legislation in the past; however, this year the Administration coupled it with the transfer of teacher pension obligations from the State to local governments. Local governments view the revenue gained from taxing IDOTs, estimated to be $40 million annually, as essential in light of their increased obligations for teacher pensions. Although this tax measure died along with all of the others on Sine Die, it will certainly be back in a Special Session and is expected to pass.

Public-Private Partnerships

 Another bill that did not pass was SB 358 / HB 576, the Public-Private Partnership bill.  While we were only trying to remove amendments to this legislation that were potentially harmful to BOMA members, the bill as amended in the House was not accepted by the Senate. It may also reappear in a Special Session.

Offshore Wind

One of the Governor’s major initiatives this year was legislation to establish an offshore wind facility off the mid-Atlantic coast. Similar legislation was introduced in 2011, and BOMA and other commercial real estate organizations opposed it for the same reason: the cost was unpredictably high when measured against the potential benefit of such an installation. As in 2011, this legislation failed to pass; however, the margin of defeat was narrower this year and we may expect to see a similar bill in a future legislative session.

Environmental Fees

Two major legislative enactments will affect BOMA members, beginning later this year.   The first is HB 446 – Bay Restoration Fees. Popularly known as the “flush tax,” this legislation substantially increases fees payable for both residential and commercial buildings. BOMA supported the amended form of the bill because it would spread the application of the increased fees across a broader base. While the fees are intended to be used primarily to upgrade wastewater treatment plants, they may also be applied to grants to local governments for a portion of their costs for stormwater management. That feature is important to BOMA members because of the enactment of HB 987, a bill that requires local governments to adopt and implement provisions establishing a watershed protection and restoration program. This is often described as a tax on impervious surfaces: building rooftops, sidewalks, roadways, parking lots, etc., and has a potentially significant effect on operating costs of commercial properties.   BOMA supported amendments to this legislation that requiring any stormwater remediation fee to be based on the services that are related to the property and actually provided by the local government. In other words, these fees may not be used to subsidize one class of properties by another. Other protections BOMA supported included provisions to reduce these fees to account for both on-site and off-site systems that are currently used by commercial property owners for stormwater management, so those owners may receive credit for what they are doing today. The law also requires a local government to establish guidelines for fee reductions for properties that are using best management practices and that account for the costs of stormwater management facilities maintained by a property owner.

Because of this new requirement imposed on local governments, BOMA will need to take an active role in the process of establishing stormwater management plans in each of those local jurisdictions where our members’ properties are located.

Energy Usage

In 2011 commercial real estate owners were facing onerous legislation that would have required that every building owner to use a program known as EPA Portfolio Manager for the purpose of measuring electricity usage in a building and providing that information to prospective purchasers or tenants in the building. Together with other commercial real estate organizations, BOMA was successful in stopping that legislation. This year, we worked with the House Environmental Matters Committee to draft a bill (HB 935) that would simply require the landlord to provide relevant information to a prospective tenant who has signed a letter of intent. Although HB 935 passed the House, it did not pass the Senate Judicial Proceedings Committee so we expect to see this issue return next year.

Green Buildings

 There were a number of green or sustainable building measures that passed this session, and many others that did not.

 House Bill 1 requires the property owner or manager of an apartment building or the council of unit owners of a condominium containing 10 or more units to provide for the collection and removal of recyclable materials by October 1, 2014. A county may require property owners, managers, and councils of unit owners to report to the county on recycling activities. The bill establishes a penalty of $50 for each day that recycling is not provided for or carried out in accordance with the county recycling plan. Enforcement of the bill, including the authority to conduct inspections, is to be provided by a local government, and any penalties collected are paid to the jurisdiction that brought the enforcement action.

 Regulating impervious surfaces on a property, either by establishing a maximum allowable area or a ratio of impervious surface to the total lot area, is a common zoning performance standard used by local governments to manage stormwater and open space/green areas. Local governments typically set higher impervious surface area and ratio standards for industrial and commercial zoning districts compared to residential zoning districts due to the size of the buildings and parking lots relative to their lot area. HB 1117 specifiesthat, for the purposes of issuing a permit or variance relating to zoning, construction, or stormwater for a project to install a solar panel, any calculation relating to the impervious surface of the project required by the State or local governing authority issuing the permit or variance may include only the foundation or base supporting the solar panel. The bill does not apply in the Chesapeake and Atlantic Coastal Bays Critical Area.

 A bill that did not pass (HB 1088 ) would have established financing program requiring utilities to extend low- or no-interest loans to qualifying residential and commercial customers for energy-efficiency upgrades (up to $50,000 for a commercial customer). The proposed legislation ran into opposition in the Senate, receiving an unfavorable report from the Economic Matters Committee.

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