Council Adds Transportation Exemptions, Leaves School Payments Intact
Montgomery County has completed its quadrennial modifications to the Growth and Infrastructure Policy (GIP) amid sluggish development activity that has reduced impact tax collections for the county and complaints from real estate professionals about the complexity and cost of development-related exactions. After a year of review by the Montgomery Planning Department and the County Council, the new GIP took effect this month.
GIP Basics: An APFO By Any Other Name . . .
The GIP is an evolution of Montgomery County’s Adequate Public Facilities Ordinance (APFO), first adopted in 1973 to ensure that public infrastructure construction keeps pace with new residential and commercial development. The GIP establishes rules for deciding what transportation improvements developers must build (or mitigate) as part of their projects (such as additional turn lanes, cycle tracks, or traffic lights) and how much they must contribute to the county’s capital budget for schools, when building housing, offices, or retail space.
The GIP is applied during the entitlement process, generally as part of the approval of a preliminary plan of subdivision. Transportation requirements and school fees are based largely on the adequacy of existing transportation and school facilities in the project’s vicinity, determining the measures developers must take to mitigate or pay for their project’s impact. Developers must also pay a separate Impact Tax for both schools and transportation.
What’s New in the 2024 GIP?
Two technical working groups, including representatives from Rodgers Consulting, collaborated on the 2024 GIP. Not all of the working group recommendations were accepted but several beneficial changes were enacted.
Transportation
LATR changes. The new GIP made several changes to Local Area Transportation Review (LATR), a complex set of guidelines for analyzing the effects of a development on the transportation network and imposing mitigation requirements:
- Traffic study criteria. The revised GIP returns to the use of vehicle trips as opposed to person trips, with the threshold for LATR analysis revised from 50 to 30 net new peak-hour weekday motor vehicle trips.
- Proportionality guide. A new $765 flat fee per Net New Daily Motor Vehicle Trip will be used to establish the maximum cost of LATR obligations.
- Streamlined Non-Motor Vehicle Analysis. Revisions to the GIP reduce LATR requirements for analyzing Pedestrian Level of Comfort (PLOC), ADA Compliance, Illuminance, Bicycle Level of Comfort (BLOC), and Bus Transit adequacy.
Additional LATR refinements include clarification of the treatment of off-site improvements, trip reduction credits and methods, agency response time, and updates to memoranda of understanding with the City of Gaithersburg and City of Rockville. The number of trips generated by a development application is calculated by adjusting benchmark estimates published by the Institute of Transportation Engineers (ITE) for the relevant size and type of development (e.g., a 1,500 square foot restaurant, 20,000 square feet of office space, etc.) with adjustments based on observed travel behavior in the neighborhood or district where the project is located, including non-automobile mode share. These local adjustment factors can be found in the appendices to the LATR guidelines.
LATR exemptions. The new GIP exempts certain types of development from LATR analysis:
- Mixed-income housing communities. In order to encourage development of affordable housing, projects filed under a Mixed Income Housing Community (MIHC) plan or equivalent (see Sec. 59.3.3.4a of the County’s zoning ordinance) are now exempt from LATR transportation study and mitigation requirements.
- Bioscience projects. These projects continue to be exempt from LATR. The three-year building permit deadline for bioscience projects receiving exemptions has been removed.
- New “Downtowns.” Certain newly designated areas, referred to as “Downtowns,” are exempt from Motor Vehicle Adequacy study and mitigation, although they may still be required to evaluate and improve infrastructure for pedestrians, cyclists and transit users depending on the size of the project. These areas are treated similarly to the “Red” Policy Areas, which are the most intensively developed urban parts of the county.
- Specific Policy Areas. Areas such as the North Bethesda Metro Station Policy Area (formerly the White Flint Policy Area), the White Oak LATIP Area, and the Potomac Policy Area are also exempt from the Local Area Transportation Review (LATR) rules. This exemption supports development in these strategic locations.
The updated GIP’s LATR exemptions are designed to promote smart growth by encouraging development in areas with existing infrastructure and high-quality transit, thereby reducing the need for extensive transportation studies and mitigation measures.
Policy Area revisions. The new GIP divides the county into 48 “Policy Areas” for purposes of transportation analysis, up from 41 in the 2020 GIP, and designates new “Downtowns” exempt from motor vehicle study and mitigation in much the same way as “Red” Policy Areas were already exempt from such requirements.
Transportation Impact Tax Exemptions. The County Council approved exemptions for office-to-residential conversions, small single-family detached units, multifamily units with three or more bedrooms, transit-adjacent projects without on-site parking, and bioscience facilities. Areas like the North Bethesda Metro Station Policy Area, White Oak LATIP Area, and Potomac Policy Area are also exempt from LATR rules.
Transportation Impact Tax credits: The new GIP allows credits against impact taxes for transportation capacity improvements on state roadways but not for non-capacity improvements like traffic signals or sidewalks.
The Planning Department plans to publish a new Transportation Adequacy Form to streamline the analysis of transportation adequacy in the development review process. A draft version of the new form is available for review now.
Schools
The updated GIP made several changes to policies governing development-related payments for school construction, but these modifications were largely technical tweaks with little impact on the rates charged for most real estate projects.
School impact taxes. The County Council decided to maintain the “cap and carry” policy for school impact taxes. This policy ties the taxes to the cost of school construction but limits any increase to 20% every two years. This ensures that the taxes remain predictable and manageable for developers.
(Note: the Tax Fee’s Per Dwelling Unit shown above are effective between July 1st, 2023 and June 30th, 2025. Expect a 20% increase to the numbers shown below in the middle of this year)
Student Generation Rates: As part of the GIP analysis, projects must be assessed for the average number of students being added. MNCPPC publishes standard student generation rates for each fiscal year; you can find the rates for FY 2024-2025 below.
Utilization Premium Payments (UPPs). Instead of reviving development moratoria in crowded school clusters, the new GIP continues the policy established in 2020 of requiring developers to make UPPs in areas where schools are over capacity.
If a project is in a school service area found to be inadequate measured by the Annual School Test, the applicable UPP factor is imposed as a surcharge to the impact tax for each market rate unit. Funds collected can now be used for capital projects in adjacent school clusters. This change provides more flexibility in addressing school capacity issues. This chart from the Planning Department shows the new UPP schedule:
Elimination of “Greenfield” development areas. The new GIP eliminates the concept of “greenfield” development areas for UPPs, reflecting the county’s mature development pattern with very few greenfield sites remaining. This change aligns with the county’s focus on infill and turnover areas.
State reimbursements and impact tax rates. The school construction cost estimates used to calculate school impact tax rates do not deduct the amounts reimbursed by the state of Maryland. This means that the taxes contribute more money to the school system than the school system pays to accommodate the need for additional school capacity caused by new development. The County Council declined to reduce school impact tax rates (and UPPs) to reflect these state reimbursements, reflecting the continued reluctance to cut sources of funding for schools.
Takeaways
Collaboration between industry and agencies led to important improvements in the new GIP, but it remains more complicated and costly than APFO frameworks in other Washington region jurisdictions. Here’s a chart prepared by the Planning Department showing how Montgomery County’s system stacks up against other jurisdictions in the Washington region:
The Planning Department acknowledges that Montgomery County’s fees remain among the highest in the region, partly because they are structured to incentivize development in targeted growth areas. While this structure has (somewhat) encouraged smart growth, it has also increased development costs in many parts of the county, especially in suburban neighborhoods that are not near urban centers served by high-quality transit service. Though no panacea, the update to the county’s GIP is a step in the right direction that ultimately reflects a more cooperative relationship between industry and elected leaders in addressing the challenges facing Montgomery County’s land development processes.