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How Howard County Developers and Politicians Plan to Increase the Budget Deficit


How Howard County Developers and Politicians Plan to Increase the Budget Deficit

Hiruy Hadgu

“[N]ew residential development not only “pays its own way”, it also subsidizes existing residential units in the County”. This was a conclusion reached by a Urban Analytics after conducting a study paid for by taxpayers in response to the adequate public facilities ordinance (APFO) update of 2018.

If this statement does not sound familiar, it is the same conclusion a similar study reached fifteen years ago.

In 2005, economist Anirban Basu’s firm Sage Policy Group conducted a study for the Maryland Builders Association, in response to a slew of impact fee legislation adopted by several Maryland Counties and concluded "what we have found is that new development tends to more than pay for itself and disproportionately finances the growth in government…”

The APFO fiscal impact study prepared for Howard County by Urban Analytics appears to have several flaws in its assumptions and methodology, that it renders its revenue impact predictions meaningless.

First the impact study methodology appears to have no benchmark data. The report utilizes a model developed in Excel Spreadsheet that employs “more than 90 input variables”. Then it models General Plan 2030 with and without APFO impacts to project a 20-year impact. Before predicting the future, why was it not shown to predict the present by using development data for the past 20 years? This action – called validation and verification – is a major tenet of any code development process. One has to show the code works for a known system before it can be used to predict an unknown system.

Think of the fiscal impact methodology like QuickBooks. For a given year, it is possible to enter all receipts of income and expenses and the balance shown by the software should match your bank balance.

QuickBooks can also potentially be used to project future bank balance by making assumptions about income (new job, raise, etc…)and expense (gas bill goes up, grocery bill goes down, cable bill stays the same, etc…).

The APFO fiscal impact study is predicting the future before it has been shown to calculate the present deficit. In code parlance this is called “fidelity”.

Before it can predict the future (an unknown system), any code and methodology should first be able to replicate the present using past data (a known system). Furthermore it should be peer-reviewed by independent entities. The Urban Analytics report has not been shown to have fidelity in predicting the future.

Second, the report says “in layman’s vernacular, new residential development not only “pays its own way”, it also subsidized existing residential units in the County. The authors of the study failed to reconcile this conclusion with the recent Fire Department tax increase due to unmitigated growth, the impacts growth had on Howard County General Hospital capacity, which led the hospital to receive county funds for expansion, the budget deficits of the past few years, road congestion experienced by residents due to poor level of service on county roads, and school overcrowding.

Third, the authors state that the methodology of allocating expenditures removes “outliers”- specifically those directly attributable to cumulative impacts of poor mitigation of development. For example, the report states “data on police department and fire department calls for services were collected, and any excess activity associated with Ellicott City in 2018 were not included [because it’s a one-time activity]”. But, this is not true since the Ellicott City floods have been directly attributed to unmitigated development. The cumulative impact of the floods – cleanup costs, first responder costs, and other future mitigation impacts – would need to be incorporated either in the prototype projections for Ellicott City, or county-wide projections by allocating the costs among all residents.

To support its claim that new residential development is a source of net revenue surplus, the report states “new residential development at the countywide level generates a net fiscal surplus […] due in large part to Howard County’s local income tax on residents.” This is a huge logical fallacy. Taxpaying residents do not come to Howard County to pay higher taxes. They come to Howard County for its infrastructure. Specifically they come to Howard County for its good schools. Without its good schools, the taxpayer would leave and the local income tax would be incurred on those unable to pay it.

It is still a mystery why the administration of a County Executive who voted for the APFO legislation (after a similar hit-piece was published in 2018) pushing this study’s narrative?

This are just a few of the looming unanswered questions and flaws from this study. Others have identified many more. The conclusions of this report will exacerbate the current budget deficit. This will deteriorate our infrastructure and quality of life.