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Garbage in, Garbage out: The Special Interest Hit Piece Report against APFO Reform

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Garbage in, Garbage out: The Special Interest Hit Piece Report against APFO Reform

Hiruy Hadgu

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In mathematical modeling, the term "garbage in, garbage out" is used to warn that a model is only as good as its input and assumptions. If the input and assumptions are wrong then the output will be wrong.

After the APFO bill the County Council passed last year was declared invalid, the special interests who oppose any meaningful growth management process commissioned a report that "studied" the legislation's "Economic and Fiscal impacts" on the County.

The report maybe found here.

Some may wonder, what is APFO? It is short for adequate public facilities ordinance (APFO) and it is the County's growth management tool. Here is a brief video on why we need to strengthen it. 

Essentially, the County's public facilities such as schools, police, EMT, and roads, are financed by tax-payer dollars. The facilities require expansion with growth. For far too long, the County has been growing without the attendant expansion of the public facilities. Worse still, developers have been profiting from low school and road surcharge fees.

The final APFO legislation from last year was filed earlier this month. A few hours before the public hearing, the Howard County Economic Development Authority (HCEDA) released a so-called economic and fiscal impacts report.

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This report is simply a hit-piece on the APFO bill to scuttle the progress made to strengthen the County's ability to manage growth.

There are many issues with the report and it is not possible to cover them all. It has glaring issues with claims, assumptions, and contradictions, prepared with the sole intent to mislead and shape legislation with a narrative that fits a specific outcome.

For starters, any serious report that looks at the fiscal impacts of APFO legislation would look at the costs and benefits of the proposed legislation. For too long, taxpayers have been saddled with the cost of new development. This report only looks at "foregone" revenue due to the legislation.

The tangible costs of school overcrowding are not difficult to include. For example, the cost of the new Hanover Hills Elementary School is $57,000 PER pupil, while the county charges $2,500 per new development in school impact fees.

But the report ignores these costs.

The report claims that the county will lose construction-related revenue of $56 million over four years. Note that this is an economic impact that estimates direct, indirect and induced economic activity associated with construction to provide this value. The first problem with this estimate is the many hypothetical scenarios used to make it.

Secondly, it ignores the associated economic costs. Such as, the economic cost to the county of diminished education quality due to overcrowding, hospital wait times, road congestion, etc...

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The next glaring issue is with the way fiscal impacts are calculated. The report mixes apples and oranges to overestimate the revenue of new construction. 

We can divide the costs associated with public infrastructure into capital and operational costs. The capital cost is to build the facility, the operational cost is to run it.

In the report, capital costs - school and road surcharge fees are combined with operational costs. Operational costs are used to run the schools and other public infrastructure after they have been built. 

Here is the justification the report uses to combine these values "although [one-time fees] are not annually recurring revenue streams like property and income tax, they are essentially recurring with continual new construction and hence an integral stream in the General Fund".

The report then makes some hand-waving argument about how these revenues are allocated to different projects and only minimal savings are realized as a result of the legislation. It ignores that a new high school can cost $125 million. It ignores the 224 portable classrooms, some of which have been in place for 30 years. It ignores the road congestion, the consequent traffic accidents, and other associated negative impacts.

The report simply ignores the costs because the preparers of the report know that managing growth has a positive impact with respect to the county budget. They even acknowledge it by claiming "although it would appear that the restriction of development would create a net-positive affect [sic] on the County budget, there are too many untested variables to validate that hypothesis".

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Speaking of hypothesis, there is a tendency to justify the use of assumptions that ONLY validate the conclusion of the report. Other assumptions are characterized as having "too many variables".

Let's consider the current APFO that has given rise to current state of affairs. Would it not make sense to compare the future with the current state? What is the baseline?

The report has one specific goal. It wants to serve as a hit-piece and sow confusion on the debate, and then cause the delay of passage of legislation. Timing is important considering the need to raise school and road impact fees through State-enabling legislation. If the County Council buys the argument that there are too many uncertainties, it will cause the State delegation to delay passage of its own bill that raises school and road impact fees until 2019 or longer.

Speaking of timing, this report was released two hours (give or take) before the start of the public hearing. Also, consider the tone of the report. It is predicting calamity. The tone combined with the timing suggests that it is not intended to provide constructive input to the discussion regarding this important legislation, but to intimidate other stakeholders. To serve as a hit-piece.

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The authors of the report state that they did not prepare a comprehensive impact report because they did not have sufficient time. It is "high-level".

But, the APFO legislation was first introduced in July of 2017 and the authors had more than six months to prepare a comprehensive impact analysis. Too much time would mean they would need to prepare a thorough report, but too little time can be used as a cover to create an alarming report. A report that is intended to be constructive would have looked at various scenarios and even made recommendations just in time for the amendments during the November 6th, 2017 session.

Those of us who live and pay taxes in the county want the best for the county. When we advocate, it is benefit everyone in the county. It is incumbent upon organizations such as HCEDA to engage at the start of the discussion with credible reports that show true impacts to everyone in the county rather than impacts to special interest groups.

Based on the content of the report as well as its timing it is not hard to conclude that a completely biased report that predicts calamitous outcome was prepared. It further states that it is only "high level" because adequate time was not available to prepare a thorough review. As a result, it suggests more time is given for such a thorough review. This would stop the progress of APFO, prevent passage of State-enabling legislation, and help maintain the status-quo.