Posted by: Patricia Salkin | April 19, 2017

MD Court of Special Appeals Denies Claims Seeking Refunds of Impact Fees

This appeal arose from the Circuit Court for Anne Arundel County’s entry of a declaratory judgment in favor of appellee, Anne Arundel County, as to all counts and claims stated in a class action complaint filed against it by appellants, William Dabbs, Sally Trapp, Samuel Craycraft, and Roberta Craycraft, “individually and on behalf of all others similarly situated.” Appellants sought refunds of impact fees that, following the fiscal year (“FY”) of collection, were not expended or encumbered within six FYs. The circuit court entered judgment in the County’s favor, ordering that appellants “take nothing in this action.” The court also denied appellants’ motion to revise class definition, as well as their motion for an accounting of County impact fee collections, expenditures, and encumbrances.

Pursuant to the authority set forth in Chapter 350, Acts of 1986, and codified in Subtitle 2 of Title 11 of Article 17 (the “Impact Fee Ordinance”) of the Anne Arundel County Code, the County can impose impact fees for the purpose of requiring new development to pay its proportionate share of the costs for land and capital facilities necessary to accommodate development impacts on public facilities. Appellants first argued that the circuit court erred in determining that the rough proportionality test, or the rational nexus test, had no application to the development impact fees in this case. The court found that the impact fees at issue were imposed by legislative enactment, and did not require landowners to deed portions of their property to the County. Moreover, appellants could not claim that the impact tax compelled property owners to suffer physical invasions of their properties, or “denied all economically beneficial or productive use of land.” Accordingly, the circuit court did not err or abuse its discretion in declining to apply the rough proportionality or rational nexus test to the County’s impact fees.
Appellants contended that the retroactivity of Bill 27-07 interfered with their vested rights, and that impact fee refunds were due. Here, the court found that Bill No. 27-07 did nothing more than codify the County’s procedure, and did not retroactively change County law or policy or purport to take away an accrued cause of action for refunds. As such, the calculation of refunds with consideration of encumbrances pursuant to the County’s procedure in Bill No. 27-07 did not interfere with vested rights. Appellants next argued that the County knowingly violated the Impact Fee Ordinance by denying them a refund of $9.9 million: the amount the County transferred from the General Fund to the Impact Fee Fund to replace fees that were improperly spent on ineligible projects. The record indicated that in FY 2008, the County credited the Impact Fee Fund for the expenditures that the circuit court had determined were improperly spent on projects ineligible for impact fee use, totaling $9.9 million. The court found that no statute authorized a refund of money transferred from the General Fund to the Impact Fee Fund to replace funds erroneously expended. Thus, the court rejected appellants’ contention that they were entitled to a $9.9 million refund.
Appellants’ next contention was based on the County Council’s enactment of Bill No. 96-01, which authorized the County to use impact fees for temporary classroom structures provided they expanded the capacity of the schools to serve new development. Appellants argued that this change in policy was simply “the County’s attempt to prevent the refund of impact fee expenditures.” Furthermore, they argued that Bill No. 96-01 violated the rational nexus doctrine, effected a taking, and was preempted by State regulation. The court likewise rejected this claim, finding that nowhere in the State definition of SRC prohibited the County from applying a definition of capacity for purposes of determining the scope of its use of impact fees broader than the definition used by MSDE for school finance purposes.
Appellants lastly argued that Bill No. 71-08, which prospectively repealed the impact fee refund provisions previously set forth in § 17-11-210, interfered with their vested rights to impact fee refunds in violation of the contracts clause and takings clause of the United States Constitution. Specifically, they argued that Bill No. 71-08 “operates as a substantial impairment of a contractual relationship between the County and special taxpayers” and “is facially unconstitutional for it violates the rational nexus doctrine by eliminating the County’s burden to demonstrate a need for the collection of impact fees.” The court noted that pursuant to § 17-11-210(b), the County was required to determine whether impact fees were available for refund within 60 days following the end of the FY. As such, a claim for a refund of impact fees collected in FY 2003 could not be ripe until August 29, 2009. As this date was after the effective repeal date of January 1, 2009, the court held that the circuit court correctly ruled that appellants were barred from claiming fees collected after 2002, and that they had no vested right that precluded the repeal.
Dabbs v Anne Arundel County, MD, 2017 WL 1180542 (MD 3/30/2017)


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