Some local developers want refunds from Montgomery County, claiming they were improperly charged a decades-old parking tax despite building projects that should’ve been exempt.
Last Thursday, the County Council’s Transportation Committee recommended approval by a 3-0 vote of a bill that would let the developers apply for the Parking Lot District tax exemption retroactively. The county executive’s office is urging the Council not to pass the bill, saying it was the property owners’ responsibility to apply for the exemption by April 1.
According to Bethesda-based land use attorneys Bob Dalrymple and Anne Mead, developers StonebridgeCarras, Washington Property Company, Home Properties, Southern Management Corp. and others were surprised to discover a few months ago that they weren’t receiving the exemptions from the PLD tax that they thought they were.
The PLD tax is charged to developers in the Parking Lot Districts of Bethesda, Silver Spring, Wheaton and Silver Spring that don’t include a certain amount of on-site parking in their projects. The PLD taxes go toward maintaining the county’s parking lots, curbside spaces and garages.
But in written testimony provided to the Council, Dalrymple, Mead and Washington Property Company President Charles Nulsen said developers couldn’t tell they were incorrectly being charged the tax because it was “embedded” in the property tax that appears in a lump sum on annual tax bills.
“We quickly learned that not only were the Named Clients unaware that they were not receiving the lawfully entitled exemptions (which is especially alarming since they all routinely have in place a detailed review of all property tax invoices by in-house and outside tax advisors), but also that the manner in which the PLD tax is levied and collected, and the lack of any clear direction to property owners advising of the possibility that exemption from the PLD tax might be legally entitled, combine to make the PLD taxation system and process an unmitigated disaster,” Dalrymple wrote.
In simpler terms: “In it’s worst light, it can be described as bureaucratic theft,” wrote Nulsen.
Joseph Beach, director of the county’s Department of Finance, disagreed and County Executive Isiah Leggett is against passage of the bill that would re-open the window for property owners to apply for the PLD tax exemption.
Besides the fact that it’s the responsibility of the property owners to apply for the exemption, Beach wrote that refunding PLD taxes could create worse financial issues for Bethesda’s already faltering Parking Lot District.
The Bethesda PLD has more than $47 million in outstanding revenue debt.
“Taking an action that calls in to question the County’s compliance with this covenant and that impedes this security for bond holders weakens market confidence in the existing debt and weakens the County’s overall credit profile in the municipal market,” Beach wrote it testimony to the Council.
Nulsen said he spent more than $4 million building parking above the PLD requirement at his Solaire Silver Spring project and the county acknowledged its compliance during Planning Department review.
Nulsen, whose company is building the Solaire Bethesda apartment project with a two-level underground garage, said the county taxed him for non-compliance for two years without his knowledge at a rate of about $240,000 a year.
“This inaccurate tax cost me not only $480,000 in cash, but impacted my permanent financing by millions of dollars,” Nulsen wrote. “It is impossible to see that you are being charged a PLD tax. This fact is highlighted by a thorough survey of tax payers in the PLD districts. The same taxpayers receive PLD credits on some properties, but incorrectly pay PLD taxes on other properties. It is simply not a conscious decision.”
Councilmember Nancy Floreen, who introduced the bill with co- sponsors Roger Berliner, Hans Riemer and George Leventhal, took the Council staff recommendation to approve the measure.
The Council, which is on recess until Nov. 25, is expected to vote on the bill in one of its three remaining regular sessions of the year.
On Thursday, Berliner said his Transportation Committee would be taking a separate look at how to improve the financial health of the Bethesda PLD.
“In my conversations, there is no opposition to increasing the PLD tax in order to ensure revenue going forward,” Berliner said.
