2002 Legislative Report: A Review of Real Estate Legislation Enacted by the Maryland General Assembly
The 2002 Session of the Maryland General Assembly met in Annapolis for 90 days to act on more than 2,300 bills. The 416th Session began on January 9, 2002 and adjourned April 8, 2002. The Governor has scheduled signing ceremonies through May 16, 2002, when he will sign or veto legislation passed by the General Assembly.
This is a review of enacted legislation that impacts upon real estate, including related environmental and business legislation:
Legislation has been compiled in this report within the following subject headings: Real Property, Business Occupations, Property Taxes, Local Property Taxes, Transfer Taxes, Taxation, Local Development, Courts, Corporations, Environmental, and Other Fun Stuff:
HOUSE BILL 385 – TIME SHARES. Many Maryland time-share instruments provide that the time shares automatically terminate on a specified date, after which all owners of a unit become tenants in common. HB 385 authorizes a time-share owners association, by a two-thirds majority vote of the members present at a meeting, to amend its time-share instrument to provide that the time shares in the time-share project will not terminate at the end of the time-share plan.
HOUSE BILL 352 – ANNE ARUNDEL COUNTY, SALES OF REAL PROPERTY, requires a contract for the sale of single-family residential real property in Anne Arundel County to contain a notice stating that the buyer should consult the appropriate County agency or County Internet web site for information concerning the current and future land use plans, facility plans, public works plans, school plans, or other plans affecting the property or area.
SENATE BILL 18/HOUSE BILL 69 – RIPARIAN PROPERTY RIGHTS. In 1999, legislation was enacted prohibiting nonresident riparian property owners from obtaining a Maryland license to erect stationary blinds or blind sites for hunting wild waterfowl along the shoreline of the Potomac River. Because the Attorney General advised that this law unconstitutionally discriminates against nonresidents in a commercial setting and is, therefore, in violation of the Privileges and Immunities Clause of the Constitution, SB 18/HB 69 amended the 1999 law to provide Virginia and West Virginia landowners with the same rights Maryland residents have with respect to licensing their riparian shoreline. Furthermore, the bill specifies those portions of the Potomac shoreline where the stationary blind licenses may be issued.
VETOED. SENATE BILL 523/HOUSE BILL 595 – NONRESIDENT BROKERS, RECIPROCITY, authorize the Maryland Real Estate Commission to approve a nonresident commercial real estate broker to engage in a transaction in the State if the nonresident broker enters into a written agreement with a State-licensed broker and is licensed in a jurisdiction that allows a Maryland broker to obtain a license under similar circumstances. A nonresident broker who is approved by the commission, and pays a fee of $45, is issued a temporary license to provide real estate broker services in the State. A nonresident real estate salesperson may only engage in a transaction in this State if the salesperson provides services under the direct supervision of a nonresident real estate broker. This legislation is intended to be consistent with the model legislation advanced nationwide by the National Association of Realtors.
VETOED. SENATE BILL 560/HOUSE BILL 52 – REAL ESTATE CONTINUING EDUCATION, require an applicant for a real estate salesperson, associate broker, or broker license to successfully complete a three-hour course in real estate ethics approved by the Maryland Real Estate Commission. These bills also modify continuing education requirements. Generally, a licensee must complete 15 hours of continuing education to qualify for renewal. However, if a licensee possesses a graduate degree in law, business, or real estate, or if the licensee has been licensed for ten (10) consecutive years and holds a real estate designation from a nationally recognized trade association, the continuing education requirement may be satisfied with 7.5 hours. Every two years, a licensee must complete a three-hour course that includes the Maryland Code of Ethics and discussion of the practices of flipping and predatory lending. Further, these bills provide for reciprocity in the continuing education requirements.
HOUSE BILL 704 – BROKER ADVERTISING, USE OF TRADE NAME, authorize a licensed associate real estate broker or salesperson to provide brokerage services under a trade name that has been approved by the Maryland Real Estate Commission. A trade name is a name other than a licensee’s full legal name and includes a first name, nickname, or last name. HB 704 also prohibits a licensed associate broker or salesperson from advertising unless the advertisement includes, in a meaningful and conspicuous manner, either the licensee’s name or trade name, as well as the name of the business with which the licensee is affiliated. The commission may deny a license, reprimand a license, or suspend or revoke a license if an individual violates provisions relating to the advertising or use of a trade name.
HOUSE BILL 79 – HOME BUILDER CONSUMER PROTECTION. Under HB 79, the responsibility for holding surety bonds and letters of credit, and for the approval and monitoring of third-party warranty plans relating to home builders, is transferred from the Department of Labor, Licensing, and Regulation to the Consumer Protection Division (CPD) of the Office of the Attorney General. The bill centralizes within CPD all regulatory functions involving homebuilders. HB 79 also requires a homebuilder to disclose to a buyer that the homebuilder must be registered with the CPD.
HOUSE BILL 592 HOME BUILDER REGISTRATION FEES, establishes an initial registration fee of $600 for all home builders; a two-tier, biennial renewal fee of $300 for home builders who have built 10 or fewer homes in the preceding calendar year; and $600 for those who have built 11 or more. The bill repeals the requirement that fees must approximate the direct and indirect costs of administering the Maryland Home Builders Registration Act by the Office of the Attorney General. The provisions in HB 592 terminate on December 31, 2005.
SENATE BILL 208/HOUSE BILL 892 - PROPERTY TAX ADMINISTRATION. Under current law, a property tax assessment can be appealed in several ways. Taxpayers, counties, municipalities, and the Attorney General can appeal an assessment within forty-five days of receipt of an assessment notice, by a petition for review, and, in the case of the taxpayer, within sixty days of purchase of property. A petition for review, which triggers an out-of-cycle assessment appeal, must be filed with the Department of Assessments and Taxation by January 1 of any year.
Since 1976, when the authority to appeal assessments by filing a petition for review was granted to local governments, Montgomery County has been the only county to use the authority. No municipality had ever filed a petition until recently when the City of Rockville filed ten and Gaithersburg filed one. The Attorney General’s Office has never filed a petition.
In recent years, Montgomery County has routinely filed a petition for appeal of a property tax assessment when property sells for significantly more than the current assessment. Property owners and the Department of Assessments and Taxation have objected that these petitions for review, by resulting in assessment increases outside of the three-year cycle for assessments under the State’s triennial assessment process, effectively violate assessment uniformity and can result in large variances in property assessments within the same neighborhood.
SB 208/HB 892 are emergency bills that repeal the authority for municipalities, counties, and the Attorney General to appeal a real property tax assessment outside of an assessment cycle. The right to appeal within forty-five days after an assessment is issued remains unchanged. The bills also provide that the Department of Assessments and Taxation may not certify an assessment after the effective date of the bill that reflects an increase related to a petition for review after January 1, 2000 by a local government, and the local government may not issue a tax bill after the effective date of the bill that reflects an increase related to a petition for review after January 1, 2000, by a local government.
SENATE BILL 571/HOUSE BILL 758 - COUNTRY CLUBS AND GOLF COURSES. In an effort to help protect golf course green space, and in particular golf course communities, from pressure to convert to commercial or residential development as a result of rapidly increasing property tax assessments, SB 571/HB 758 change the assessment method for the land of country clubs and public golf courses to the assessment method for open space if the clubs and golf courses are located on at least fifty acres with at least nine holes. The Department of Assessments and Taxation must adopt regulations establishing the value of land under this bill.
Under current law, a country club (but not a golf course open to the public) may enter into an agreement with the department for an assessment based on its current use as a country club rather than its highest and best use. A country club is not eligible for the special use assessment if it allows or practices discrimination based on race, color, creed, sex, or national origin. Golf courses are assessed at market value, with land being appraised as if the land were vacant and available for its most economic use. For both country clubs and golf courses, improvements are valued at the cost to construct such improvements, less applicable depreciation. Most country clubs and golf course land is currently assessed in excess of $5,000 per acre.
SB 571/HB 758 authorizes golf courses as well as country clubs to enter into agreements with the Department for special use valuation of land used as a golf course. Under the bills, these agreements are subject to the same nondiscrimination requirement as under the current law. Under the bills, for both country clubs and golf courses that enter into the agreements, land actively used as a country club or golf course will be valued at rates equivalent to rates for open space land.
As a result of assessing golf courses as open space at $1,000 per acre, State special fund revenues could decrease by $47,500 in fiscal 2003 and by $75,000 in fiscal 2004, increasing annually thereafter based on expected assessment increases. General fund expenditures will increase by a corresponding amount. Because all State property tax revenues are dedicated to paying the debt service on State general obligation bonds, any decrease in property tax revenue will result in increased general fund expenditures to pay debt service.
SENATE BILL 430/HOUSE BILL 588 - PERSONAL PROPERTY. Under current law, in order to correct the prior filing of a personal property tax return with the Department of Assessments and Taxation, a property owner must appeal an assessment by submitting a petition for review within three years of the date of the notice of assessment. If an assessment is reduced by means of an appeal, any refund paid to the taxpayer must provide for interest at the same rate that would have been charged if the taxes were overdue.
SB 430/HB 588 provide that a person who files a personal property report and subsequently determines that information was incorrectly reported may file an amended report and receive a refund within three years after the April 15 that the original report was due. After reviewing an amended report, the Department may either issue a corrected assessment notice or notify the person that the original assessment stands. The taxpayer may appeal the Department determination. The bills also clarify that a local government must refund tax overpayments resulting from a corrected assessment issued by the Department but a municipality can pay a refund without interest if the refund is due to taxpayer error.
Local Property Taxes
HOUSE BILL 125 - BALTIMORE CITY TAX CREDIT FOE NEWLY CONSTRUCTED DWELLINGS, extends the June 30, 2002 termination date of the Baltimore City property tax credit program for newly constructed dwellings until June 30, 2005. Baltimore City may grant a property tax credit against city property taxes imposed on newly constructed dwellings or first purchased dwellings owned by qualified owners. The credit is 50 percent for the first taxable year and decreases by 10 percent each year until it expires after the fifth year. The bill also repeals the City’s authority to grant a property tax credit for first purchased dwellings which, although authorized by the State, was never enacted by Baltimore City.
SENATE BILL 489/HOUSE BILL 558 - BALTIMORE CITY TAX SALE PROCESS, provides that certain provisions related to the sale of abandoned property in Baltimore City apply only to property sold with a minimum bid less than the lien amount. Further, a complaint to foreclosure all rights of redemption may be filed at any time after the date of the tax sale on abandoned property with a minimum bid less than the lien amount. The bills also repeal a requirement that a final judgment in a proceeding involving abandoned property in Baltimore City is void in thirty (30) days under certain circumstances, and provide that the purchaser in such a transaction is not an interested party for purposes of voiding the judgment.
Legislation in 2000 made various changes to the process of tax sales of abandoned property in Baltimore City, including that the property could be sold for less than the amount owed as long as a minimum bid is established. According to the City, the changes resulting from the 2000 bill have created confusion as to when certain redemption laws apply, and these bills clarify the redemption process for the tax sale of abandoned property. Additionally, the City is experiencing problems from individuals who purchase property at tax sale and, when the judgment to execute a deed to the purchaser is final, make a motion for the judgment to be stricken and demand their money plus interest back from the City. In an effort to correct this situation, these bills would remove the right of the purchaser to make such a motion.
HOUSE BILL 997 – GROUND RENT DONATIONS, provides that at a tax sale for abandoned property located in Baltimore City, if the property is subject to a ground rent or lease for a term of 99 years renewable forever, the whole fee simple interest in the property must be sold. Before the judgment foreclosing an owner’s right of redemption, a reversion in a ground rent or lease for a term of 99 years renewable forever may be donated to the City or an entity designated by the City. Under current law, if the property is sold at tax sale, only the leasehold interest is sold.
HOUSE BILL 525 – BALTIMORE COUNTY NEIGHBORHOOD PRESERVATION AND STABILIZATION CREDIT. Legislation in 1996 established the Neighborhood Preservation and Stabilization Act and provided a tax credit for property taxes on owner-occupied residential property bought in designated neighborhoods in Baltimore City and Baltimore County from July 1, 1996, to June 30, 1999. Chapter 319 of 1999 extended the time frame to June 30, 2001, and also increased the number of dwellings eligible for the program. Chapter 265 of 2000 extended the termination date until June 30, 2002.
The tax credit is 80 percent of the property taxes paid in each year of the first five years of ownership. This amount declines by 10 percent in each of the following years until the eleventh year, when it expires. The cost of the credit is split between the State and local governments with one-half of the credit amount being applied against the State income tax and the other half being a reduction in local property taxes owed.
HB 525 extends until June 30, 2005, the qualifying period for participation in the Baltimore County program only. Under the bill, the Baltimore City program will expire at the end of June 30, 2002.
HOUSE BILL 759 – HERITAGE STRUCTURE REHABILITATION TAX CREDIT. During 2001, the General Assembly was advised by the Department of Legislative Services that the State could experience significant revenue losses in the near future under the Maryland Heritage Structure Rehabilitation Tax Credit. The Heritage Credit, administered by the Maryland Historical Trust in the Department of Housing and Community Development, was established in 1996, expanded in 1997 and 1998, and made refundable in 2001. Based on information provided by the Maryland Historical Trust, under current law, it is projected that the Heritage Credit will reduce State revenues by $50 million to $84 million annually.
Under current law, a person may claim a tax credit in an amount equal to 25 percent of the taxpayer’s qualified rehabilitation expenditures for the rehabilitation of a certified heritage structure for the taxable year in which a certified rehabilitation is completed. The Heritage Credit is allowed for both residential and commercial projects and may be claimed by nonprofit organizations.
HB 759 significantly limits the Maryland Heritage Structure Rehabilitation Tax Credit. The bill reduces the credit percentage to 20 percent and provides that a State tax credit for a single rehabilitation under the program may not exceed $3 million. Rehabilitation expenditures that qualify for the credit are limited to the estimated expenditures stated in the application for approval of a proposed rehabilitation submitted to the Maryland Historical Trust. HB 759 also eliminates a provision in the law under which the credit could be taken for expenditures financed by State grants and other State financing.
The bill further limits the use of the Heritage Credit by providing that a single rehabilitation includes the phased rehabilitation of the same structure and the rehabilitation of multiple structures that are functionally related. Additionally, HB 759 repeals current law that authorizes the Maryland Stadium Authority to utilize the heritage credit on behalf of the Hippodrome Performing Arts Center. Financing of the Hippodrome Performing Arts Center was accommodated through increased bonding authority under the provisions of HB 1256.
The bill, which takes effect on June 1, 2002, “grandfathers” all incomplete projects for which an application has been submitted for approval of a proposed rehabilitation as of February 1, 2002 (the introduction date of the bill), and provides that these projects may take the credit under the law in effect on May 31, 2002.
HB 759 also states that it is the intent of the General Assembly that Heritage Structure Rehabilitation Tax Credits for commercial rehabilitations not exceed $50 million annually and requires the Department of Legislative Services to monitor approval of commercial rehabilitations under the credit in a calendar year would result in more than $50 million in tax credits, the Department of Legislative Services is required to notify the General Assembly and to prepare legislation that would implement a $50 million overall cap.
Lastly, HB 759 provides a two-year sunset for the credit that will allow the General Assembly to evaluate the usage of the credit over the next two years and make a determination as to its continuation.
Recordation and Transfer Taxes
HOUSE BILL 512 – REFINANCING INSTRUMENT, authorizes an agent of a mortgagor to provide a written statement that would qualify a mortgage refinancing instrument for an exemption from recordation tax. The agent must provide a signed statement that the mortgage property is the principal residence of the mortgagor and stating the amount of the unpaid principal of the original mortgage that is being financed.
SENATE BILL 323 – THE BUDGET RECONCILIATION AND FINANCING ACT, transfers $11,227,425 in excess actual transfer tax collections for fiscal 2001 from Program Open Space to the general fund and $47,268,585 in transfer tax revenues to the general fund for each of fiscal 2003 and 2004 only.
FAILED. SENATE BILL 316 and HOUSE BILL 557 – CONTROLLING INTERESTS, both failed (but are significant in that the bills will likely be reintroduced in 2003), would have imposed recordation and transfer taxes on the transfer of real property, with a value of $500,00 or more, when the transfer is achieved through the sale of a “controlling” interest in a corporation, partnership, limited liability company, limited liability partnership, or other form of unincorporated business. “Controlling” interest was defined in SB 316 as more than 50 percent of total value of the stock or the interest in capital and profits and defined in HB 557 as more than 80 percent of total value of the stock or the interest in capital and profits.
The bills specified: (1) that they applied to transfers of controlling interests by entities having tangible assets of which at least 80 percent are comprised of real property in Maryland; (2) that certain transfers (e.g., mergers and dissolutions) would be exempt; and (3) that a report must be filed with the Department of Assessments and Taxation upon the transfer of a controlling interest within thirty (30) days of the final transfer.
It was estimated that these bills would have generated an additional $4.8 million in State transfer tax revenue in fiscal 2003 and $9.6 million annually thereafter. In addition, it was estimated that these bills would have produced an additional $16 million in local recordation and transfer tax revenues in fiscal 2003 and $32 million annually thereafter. Initially, the Budget Reconciliation and Financing Act (SB 323) would have transferred $4.8 million in transfer taxes to the general fund contingent on enactment of these bills, but see SB 323 above.
HOUSE BILL 1 – COMMISSION ON MARYLAND’S FISCAL STRUCTURE, is an emergency bill establishing a 17-member Commission on Maryland’s Fiscal Structure to review and evaluate the State’s current budget and fiscal structure. This evaluation will be an effort to help develop long-term strategies for addressing future budget needs and shortfalls in the areas of funding education, transportation, and health care. The Commission must submit an interim report on December 15, 2002, and a final report September 1, 2003. Staff support for the Commission must be provided by the Department of Legislative Services, the Department of Business and Economic Development, and the Comptroller’s Office.
Specifically, the Commission will review: (1) changes to the State budget process, spending affordability process, and capital debt affordability process that would allow for more effective development and enactment of the annual State budget; (2) options to ensure that the State will have a progressive tax structure through examination of the income, sales, property, excise, and business taxes, including any changes that may be necessary to ensure equity and efficiency in the State’s tax system; (3) methods to address funding sources for the education needs outlined in the report of the Commission on Education Finance, Equity, and Excellence, the transportation needs outlined in the report of the Commission on Transportation Investment, and the health care funding needs outlined in recent years; (4) options to address inefficiencies in and improvements to State government services and operations; and (5) changes to the State’s tax structure that would allow the State to be more competitive with surrounding states regarding economic development.
HOUSE BILL 143 – ST. MARY’S COUNTY RIGHT TO FARM, authorizes the County Commissioners of St. Mary’s County to adopt an ordinance or regulation or take any other action that the County Commissioners consider necessary to protect a person’s right to farm or engage in agricultural or forestry operations. Similar legislation has been enacted for other counties, including Calvert, Caroline, Carroll, Dorchester, Frederick, Garrett, Somerset, and Washington counties.
SENATE BILL 189 – URBAN RENEWAL AUTHORITY MUNICIPAL GOVERNMENTS. Eleven municipal corporations sought and received from the General Assembly urban renewal authority for slum clearance under the provisions of Article III, § 61 of the Constitution of Maryland. These bills add an appendix to the charter of each of the eleven municipal corporations addressing that municipality’s powers relating to urban renewal projects, creation of an urban renewal agency, approval of an urban renewal plan, disposal and condemnation of property in an urban renewal area, and the issuance of general obligation and revenue bonds. These bills granted urban renewal authority for slum clearance and redevelopment to the Town of Marydel in Senate Bill 189 (Ch. 10), the Town of Henderson in Senate Bill 190 (Ch. 11), the Town of Goldsboro in Senate Bill 191 (Ch. 12), the Town of Greensboro in Senate Bill 193 (Ch. 13), the town of Charlestown in Senate Bill 312, the Town of Preston in Senate Bill 690), the Town of Ridgely in Senate Bill 691, the Town of Hillsboro in Senate Bill 692, the Town of Landover Hills in House Bill 635 (Ch. 74), the Town of Cottage City in House Bill 639 (Ch. 75), and the Town of Capitol Heights in House Bill 648.
With the passage of these bills, 62 out of 156 municipal corporations now have urban renewal powers under the Constitution.
HOUSE BILL 776 – PRINCE GEORGE’S COUNTY DEVELOPMENT RIGHTS AND RESPONSIBILITIES AGREEMENTS. Under current law, the Prince George’s County Council must impose adequate public facilities standards and requirements for public schools. Article 66B of the Code generally authorizes counties and municipalities to enter into development rights and responsibilities agreements with a developer to set conditions under which a development may proceed for a specified time. HB 776 authorizes the Prince George’s County Executive, subject to the approval by the District Council, to enter into development rights and responsibilities agreements with developers regarding real property located in Prince George’s County. The agreements are currently available only for the purpose of advancing school capacity in the County.
SENATE BILL 108 – RECORDABLE INSTRUMENTS, repeals the requirement that the Clerks of the Circuit Courts receive, index, and file plats showing property or rights-of-way acquired or conveyed by the State Highway Administration or the State Roads Commission. The bill directs the plats to be filed with and electronically recorded by the Maryland State Archives and authorizes that agency to charge a reasonable fee to recover costs.
VETOED. HOUSE BILL 70 – DISTRICT COURT SMALL CLAIMS ACTIONS. In a small claim action, court forms are used to file pleadings, and the rules of procedure and evidence are relaxed to make it easier for parties to represent themselves without hiring an attorney. An officer or employee of a corporation or other business entity may appear on behalf of the entity in a small claim action.
HB 70 increases the maximum amount of a small claim, over which the District Court of Maryland has exclusive jurisdiction, from $2,500 to $5,000. The bill also increases, from $2,500 to $5,000, the amount in controversy: (1) above which the District Court and Circuit Courts have concurrent jurisdiction in civil cases; and (2) for which a civil appeal from the District Court must be based on the record.
SENATE BILL 631/HOUSE BILL 888 – UNIFORM COMMERCIAL CODE. Legislation in 1999 significantly revised Title 9 of the Maryland Uniform Commercial Code (UCC) as adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL). One of NCCUSL’s revisions, adopted by Maryland in Chapter 282, broadened the definition of a “payment intangible” to include most obligations to pay money that do not fall into one of the specifically excluded categories of collateral. This includes rights to receive Workers’ Compensation benefits, structured settlement benefits received for physical injuries or sickness, and trust benefits. SB 631/HB 888 exempt from the assignable payment rights under Title 9 of the UCC: claims or rights to receive compensation for physical injuries or sickness under a Workers’ Compensation claim or damages received because of physical injuries or sickness, whether by suit or agreement or whether as lump sums or periodic payments; and income from a special needs trust for disabled individuals where all or, under specified circumstances, part of the trust is paid to the State upon the death of the individual.
Corporations and Associations
HOUSE BILL 1357 – MERGERS OF LLCS, authorizes a domestic, or Maryland, LLC to merge into one or more domestic or foreign LLCs, unless the operating agreement provides otherwise, and authorizes the merger of multiple foreign or domestic LLCs into a single domestic LLC. The bill also alters the manner in which a domestic LLC must approve a merger by requiring the consent of the members holding at least two-thirds of the interests in profits of the LLC.
HOUSE BILL 379 – NONPROFIT LIMITED LIABILITY COMPANIES. Since enactment of the Maryland Limited Liability Company Act of 1992, the limited liability company (LLC) has grown in popularity and has been used for a wider range of purposes than was originally anticipated. One new area of use is in the not-for-profit arena. In other states, LLCs are used as the vehicle through which tax-exempt organizations can conduct activities related to or supporting their purposes. In Maryland, however, it is not clear that an LLC can be used for not-for-profit purposes.
HB 379 alters Maryland’s Limited Liability Company Act to modernize the law and facilitate the use of LLCs for not-for-profit purposes. The bill broadens the purposes for which an LLC may be organized by authorizing an LLC to conduct activities related to any lawful activity, whether or not for profit, except the business of acting as an insurer. The bill also changes the current law requirement that a member must hold an economic interest in the LLC by expanding the current definition of a “member” to include a person who is admitted as a member, and allowing a person to be admitted as a member without making a contribution or acquiring an interest in the LLC. These changes are intended to ensure that a nonprofit can qualify for tax-exempt status under the Internal Revenue Code, which prohibits the inurement to a member of any economic benefit derived from a tax-exempt organization. HB 379 also alters the method for dissolving or winding up the affairs of an LLC, and establishes a mechanism for continuation of an LLC after it ceases to have any members.
The bill also allows commercial lenders who lend money to an LLC to take a noneconomic voting interest in the LLC and protects the lender’s lien by ensuring that the LLC will continue in existence even if all the economic owners withdraw from the entity. The bill brings Maryland’s LLC statute into conformity with the neighboring states of Delaware, Virginia, and North Carolina.
SENATE BILL 326/HOUSE BILL 528 – CHESAPEAKE BAY CRITICAL AREAS. Legislation in 1984 established the Chesapeake Bay Critical Area Protection Program in the Department of Natural Resources (DNR) to permit only very limited development activity in a consistent and uniform manner along shoreline areas of the Chesapeake Bay and its tributaries so as to minimize damage to water quality and natural habitats.
Under the program, development in the Chesapeake Bay Critical Area is limited, based on a local jurisdiction’s critical area program. Current regulations require local jurisdictions to provide for variances to the program where enforcement would result in an unwarranted hardship to an applicant. Three decisions by the Maryland Court of Appeals since 1984 have very much upset environmental interests’ understanding of variance law as applied in the Chesapeake Bay Critical Area. Under these rulings, applying the law established in the area of zoning variances, a variance may be granted for development when an applicant is denied reasonable and significant use of any portion of the property, even if alternative sites are available on the applicant’s property; and, grandfathered structures may be considered when deciding whether denial of a variance for new development would be unfair to an applicant.
In response, SB 326/HB 528 statutorily restricts the conditions under which a variance may be granted. These conditions include: consideration of the entire property when determining whether unwarranted hardship exists; the applicability of comparisons only to development since the implementation of a local critical area program; and the satisfaction of all variance standards. Further, a local program must consider the reasonable use of the entire parcel. Building permits or other activities that comply with an approved buffer exemption or buffer management plan are exempted from the coverage of these bills. Also, each local jurisdiction is required to review its program and propose program amendments every six years, rather than the current four-year cycle.
SENATE BILL 247/HOUSE BILL 301 – ATLANTIC COASTAL BAYS PROTECTION. Maryland’s coastal bays, often called the back bays, are shallow water lagoons west of Ocean City and Assateague Island. They include the Assawoman, Isle of Wright, Sinepuxent, Newport, and Chincoteague bays. The shallow bays provide habitat for rare species of plants and animals as well as blue crabs and clams. The Coastal Bays Management Plan, which was released in June 1999, identified five primary problems in the coastal bays: degraded water quality, chemical contamination, loss of habitat, changes in living resources, and unsustainable growth and development.
SB 247/HB 301 apply the existing restrictions on land use of the Chesapeake Bay Critical Area Protection Program and corresponding regulations to the Atlantic Coastal Bays Critical Area. In addition to all waters and lands under the coastal bays and their tributaries and all areas within 1,000 feet of wetlands and the heads of tides, the Atlantic Coastal Bays Critical Area also would include additional areas proposed for inclusion by local jurisdictions and approved by the Critical Area Commission.
The bills direct the Governor to include funds in the fiscal 2003 budget for grants to reimburse local jurisdictions for the reasonable costs of developing a local coastal bays critical area program. Local jurisdictions within the Atlantic Coastal Bays Critical Area are required to map the coastal bays area and to establish the three land use designations used in the existing Chesapeake Bay Critical Area Program: Intensely Developed Areas (IDAs), Limited Development Areas (LDAs), and Resource Conservation Areas (RCAs).
The land use designations within the Atlantic Coastal Bays Critical Area are based on land uses and development in existence as of June 1, 2002. In the same manner as the current Chesapeake Bay Critical Area, in order to accommodate future population growth, the total IDA and LDA acreage may be increased by a “growth allocation.” This allowable development increase is calculated by formula and may be transferred between the Chesapeake and Atlantic coastal bays critical areas under certain conditions.
Concerning development activity on existing lots, if a lot is legally recorded, legally buildable, and was approved by a local jurisdiction before the date of final program approval, on or before September 29, 2003, then development activity is permissible.
Each local jurisdiction’s program must include a provision requiring proposed development sites in IDAs to proved a forest or developed woodland cover of at least 15 percent after development or a provision for a fee-in-lieu payment, including exceptions for certain single lots. In addition, each program may include provisions regarding: the use of bio-retention and other nonstructural stormwater best management practices; minimum buffer requirements applicable to specified tributary streams located outside the critical area but within the coastal bays watershed; and wetland improvements, also known as “wharfing out.”
The bills require that local programs approved or adopted by the commission take effect by September 29, 2003. They also allow for the limited grandfathering of certain development projects as to their initial development or current use.
HOUSE BILL 470 and HOUSE BILL 90 – FOREST CONSERVATION each clarify several provisions regarding forest conservation requirements. HB 470 allows for a public hearing on the approval of a forest conservation plan that is in keeping with the regulatory scheme of public participation in the formulation of the plan. In addition, the bill requires the State to develop forest conservation requirements for State development projects that are comparable to those of local programs. Finally, the bill clarifies that all penalties paid for noncompliance must be paid into the Forest Conservation Fund. HB 90 requires an owner of land that is subject to a forest conservation management agreement to provide notice to the buyer regarding the existence of the agreement and to DNR if the land is sold or transferred.
HOUSE BILL 295 – PENALTIES AND DEPARTMENT OF THE ENVIRONMENT FEES. The mission of the Maryland Department of the Environment (MDE) is to protect and restore the quality of Maryland’s air, water, and land resources for the benefit of the environment, public health, and future generations. MDE accomplishes its mission by assessing, preventing, and controlling sources of pollution. Among other things, MDE regulates air quality and radiation, the storage and use of hazardous substances, solid waste disposal, water appropriation and use, wetlands and waterways, and the discharge of pollutants into the State’s waters. Concern has been raised by environmental interests in recent years that many permittees find it less expensive to pay fines and penalties than to upgrade their systems and processes in order to meet permit requirements. Thus, the Glendening Administration introduced several modifications of existing penalty provisions in order to increase the dollar amounts and their deterrent effect. Moreover, the Administration sought to establish fees that would generate a source of revenue for MDE to increase its permitting, inspection, and program activities.
Currently, for violations of specified air quality laws, a person is guilty of a misdemeanor and on conviction is subject to: (1) for a first offense, a fine not exceeding $25,000 or imprisonment not exceeding one year, or both; and (2) for a violation committed after a first conviction, a fine not exceeding $50,000 or imprisonment not exceeding two years, or both. For other specified air quality violations a person is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $10,000 or imprisonment not exceeding six months, or both. A person who violates air quality provisions is liable for a civil penalty not exceeding $25,000, to be collected in a civil action in the Circuit Court for any county. If the Attorney General concurs, the Secretary of the Environment may compromise and settle any claim for a civil penalty.
For specified radiation violations, a person is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $25,000 or imprisonment not exceeding one year, or both. Before any prosecution is begun, the Secretary must serve written notice of each alleged violation on a person who is in charge of the place where the violation allegedly exists. In addition to any criminal penalty imposed, a person who violates radiation provisions is liable for a civil penalty not exceeding $10,000, to be collected in a civil action in the Circuit Court for any county. Whether or not a court action has been filed, the Secretary, with the concurrence of the Attorney General, may compromise and settle any claim for a civil penalty.
As introduced by the Administration, HB 295 would have increased administrative penalties imposed by MDE and instituted cost recovery as an enforcement mechanism available to MDE. As passed, however, this legislation will enhance MDE enforcement efforts by extending the statute of limitations applicable to both criminal and civil actions. Generally, under current law, a prosecution for a misdemeanor must be instituted within one year of the offense. Civil actions also must be instituted within one year of the violation, with specified exceptions. HB 295 allows the initiation of a criminal prosecution or a civil action for a violation of specified air quality and radiation provisions within three years after the violation was committed.
HOUSE BILL 291 – HAZARDOUS SUBSTANCES AND CHEMICALS. The federal Emergency Planning and Community Right-to-Know Act (EPCRA) was established in 1986 as part of the Superfund Amendments and Reauthorization Act. EPCRA established an infrastructure at the State and local levels to plan for chemical emergencies. Facilities that have spilled hazardous substances or that store, use, or release certain chemicals are subject to various reporting requirements. All this information is publicly available so that interested parties may become informed about potentially dangerous chemicals in their communities. MDE is the State repository for this information. The Emergency Operations Program within MDE maintains a database of this information that is available to the public. The program also maintains the State’s copy of the Toxic Release Inventory data. All data is currently maintained in paper files.
EPCRA requires the governor of each state to appoint a State Emergency Response Commission (SERC). An SERC must appoint local emergency planning committees (LEPCs) and supervise and coordinate their activities. An SERC must also designate emergency planning districts in order to facilitate preparation and implementation of emergency plans. Each LEPC must prepare an emergency plan and submit a copy of the plan to the appropriate SERC. Each LEPC must establish rules including provisions for public notification of LEPC activities, public meetings to discuss emergency plans, public comments, the LEPC response to such comments, and distribution of emergency plans. Each LEPC must also establish procedures for receiving and processing requests from the public for information. According to MDE, there are currently 25 LEPCs in the State (in each of the 23 counties, Baltimore City and Ocean City). MDE advises that LEPCs share approximately $50,000 annually made available to the State through a federal grant program.
HB 291, also part of the Administration’s legislative package, establishes a Community Right-to-Know Fund in MDE to be used for emergency planning, enforcement, data collection, and other activities related to chemicals and hazardous substances. The bill requires facilities that are required to report under EPCRA to pay a fee of up to $1,000 annually to MDE for the new fund and to report the information required under the federal law to MDE. The bill provides for exemptions from the fee for specified types of facilities. The fee schedule will be developed by regulation but must be based on the cost to MDE of processing the information submitted to MDE under the bill. (Under current law, MDE maintains this information only in paper form.) MDE is required to use 50 percent of the new fund to provide grants to LEPCs. The bill applies civil penalty provisions to the bill and requires MDE to serve as the information repository for the SERC.
SENATE BILL 246 and HOUSE BILL 350 – DRINKING WATER REGULATIONS. The Secretary of the Environment is required to adopt and enforce State primary drinking water regulations and adopt and implement adequate procedures for enforcing those regulations. The regulations may not be more stringent than the complete interim or revised national primary drinking water regulations in effect at the time. Recent concern relating to methyl tertiary butyl ether, a gasoline additive for which no federal drinking water standard yet exists, has highlighted MDE’s inability to adopt standards for contaminants for which no federal standards exist.
SB 246, which was introduced by the Administration, and HB 350 authorize the Secretary of the Environment to adopt and enforce State primary drinking water regulations for a contaminant if the Secretary determines that the contaminant poses a significant risk to public health and if the federal government has not adopted complete interim or revised national primary drinking water regulations for the contaminant. As part of the determination, the Secretary must prepare a report including specified information such as monitoring data for the contaminant, peer reviewed assessments, methodologies and data, and a cost-benefit analysis of implementing the proposed standard for the contaminant.
SENATE BILL 248/HOUSE BILL 5 – STANDING FOR JUDICIAL REVIEW OF AIR QUALITY OPERATING PERMITS. Title V of the Clean Air Act, as amended in 1990, requires major sources of regulated air pollutants to obtain a federally-approved operating permit. States that have permit programs that meet federal requirements are approved by the U.S. Environmental Protection Agency (EPA) to issue their own Title V operating permits.
On May 9, 1995, MDE submitted an operating permits program to EPA for approval. In July 1996, EPA gave interim approval to the program and instructed MDE that certain conditions must be met in order for the State to get final approval. One of these conditions related to the enactment of State legislation in order to expand Title V standing – that is, to increase the number of persons who would be entitled to challenge the issuance of a Title V permit because of an actual or environmental injury suffered by those seeking judicial relief. Pursuant to the federal Clean Air Act, federal regulations require that for a state to gain federal approval of an air quality operating permitting program, state law must provide for expeditious review of permit actions, including applications, renewals, or revisions, and an opportunity to petition for state court review of the final permit action by the applicant, any person who participated in the public comment process, and any other person who could obtain judicial review of that action under applicable law.
Under current State law, standing for judicial review of air quality operating permit decisions is governed by the Maryland Environmental Standing Act (MESA). Under MESA, the following persons have standing to bring and maintain specified actions in the courts of equity of this State: (1) the State, or any agency or officer of the State, acting through the Attorney General; (2) any political subdivision of the State or any agency or officer of it acting on its behalf; and (3) subject to some limitations, any other person, regardless of whether the person possesses a special interest different from that possessed generally by the residents of Maryland, or whether substantial personal or property damage to that person is threatened. Non-state residents and organizations that do not have an interest separate and apart from their members do not currently have standing for judicial review of air quality operating permit decisions. Under the Administrative Procedure Act, a party who is aggrieved by the final decision in a contested case is entitled to judicial review of the decision.
The State failed to meet the deadline for revising its standing law and MDE lost federal approval of its Title V air quality operating permit program on December 3, 2001. Major sources that did not hold a permit by that date are now required to complete a federal permit application.
In an effort to address the standing issue, SB 248/HB 5 expand standing for judicial review of Title V air quality permit decisions. Under the bills, except for an applicant who seeks judicial review in accordance with the Administrative Procedure Act, a final decision by MDE on the issuance, renewal, or revision of an operating permit issued pursuant to Title V of the federal Clean Air Act Amendments of 1990 is subject to judicial review by any person who: (1) meets the threshold standing requirements under federal constitutional law; and (2) participated in a public participation process through the submission of written or oral comments, unless an opportunity for public participation was not required by statute or regulation. Judicial review must be on the administrative record before MDE and limited to objections raised during the public comment period, unless the petitioner demonstrates that the objections were not reasonably ascertainable during the comment period or that grounds for the objections arose after the comment period. Unless otherwise required by statute, a petition for judicial review must be filed with the Circuit Court for the county in which any party resides or has a principal place of business.
An applicant for an air quality operating permit may seek judicial review in accordance with the Administrative Procedure Act. Except for an applicant who seeks judicial review pursuant to that law, a person is not entitled to a contested case hearing regarding Title V operating permits.
SENATE BILL 848/HOUSE BILL 1229 – CONTESTED CASE PROCEDURES. The following permits issued by MDE are subject to the right of third parties to request a contested case hearing on MDE’s determination to issue or deny the permits: (1) air quality control permits; (2) permits to install, materially alter, or materially extend landfill systems, incinerators for public use, or specified rubble landfills; (3) permits to discharge pollutants to waters of the State; (4) specified sewage sludge permits; (5) permits to own, operate, establish, or maintain a controlled hazardous substance facility; (6) permits to own, operate, establish, or maintain a hazardous material facility; and (7) permits to own, operate, establish, or maintain a low-level nuclear waste facility. SB 848/HB 1229 establish new procedures and deadlines for the disposition of contested case hearings on such permits.
VETOED. SENATE BILL 31 – CONTESTED CASES TIME FOR MAKING FINAL DECISION. The referral of contested cases between regulating agencies and the public to administrative law judges is intended as a means of saving time and resources in resolving administrative disputes, compared with bringing these disputes to the courts. Some disputes are resolved by the administrative law judge. In other cases, the administrative law judge makes a recommendation to a final decision maker, usually an administrator or a commission. In order to ensure that contested cases are resolved in an expeditious manner, SB 31 requires the final decision maker to make a final decision within 90 days after the later of filing exceptions and presentation of arguments, unless otherwise provided by law or agreed by the parties.
Other Fun Stuff
HOUSE BILL 1076 – LOBBYIST ETHICS. The focus of attention on public ethics this Session was the portion of the Maryland Public Ethics Law that relates to the registration and regulation of lobbyists. The 2001 session's omnibus lobbyist ethics bill had expanded the lobbyist law in a variety of areas for persons seeking to influence Legislative Branch or Executive Branch actions. Concerns were raised almost immediately that some of the new provisions went beyond what the legislature had intended. Moreover, the substantially increased penalties of the new law for improperly failing to register as a lobbyist brought greater attention to compliance with registration criteria that had been in the law for over 20 years. The significant changes are as follows:
Much of the public's concern about the lobbyist law grew out of the State Ethics Commission's interpretation of long-standing "thresholds" that determined if and when a person's activities required registration as a regulated lobbyist. Under the current law, a person who interacts face-to-face with legislators or legislative staff, for the purpose of influencing legislative action, must register as a lobbyist if the person either incurs expenses of at least $100 or earns $500 as compensation.
As interpreted by the Ethics Commission, those provisions were applied to individuals who testified in Annapolis on a very limited basis or who were not being specifically compensated for the lobbying. For example, the time that a member of a professional or trade association spent in Annapolis was counted toward the compensation threshold even if the individual was using vacation or leave time. In order to accommodate these situations, while not creating a loophole for professional lobbying efforts, HB 1076 raises the expense threshold to $500 and the compensation threshold to $2,500. The increased thresholds will serve to exclude the limited activities that many observers thought should not require registration, while requiring registration for those whose actions are more concerted.
The bill also adds language to the thresholds to more closely tie the expense and compensation payments to the lobbying activity. This will exclude from registration an individual who volunteers to testify on behalf of a nonprofit organization and whose "compensation" is from a job unrelated to the organization or the legislation.
A statement of legislative intent in the preamble to the bill states specifically that the General Assembly did not intend to require registration of lawyers providing pro bono assistance to the Bar Association.
The provisions enacted in 2001 included a prohibition on a regulated lobbyist serving on a State board or commission, other than "an advisory body of limited duration." Because some lobbyists serve on boards or commissions that are unrelated to the financial interests of their lobbying clients, HB 1076 includes a process under which the State Ethics Commission will establish criteria under which regulated lobbyists may serve in these bodies. For a regulated lobbyist serving on an authorized board or commission, there will be financial disclosure requirements that go beyond the requirements for other members of the board or commission. The State Ethics Commission is to adopt regulations to implement these provisions.
COURT RULES INVALID. SENATE JOINT RESOLUTION 3/HOUSE JOINT RESOLUTION 3 – LEGISLATIVE REDISTRICTING. The reconfiguring of the State's 47 legislative districts was the subject of considerable attention both before and during the 2002 session. The Constitution of Maryland (Article III, Section 5) requires the Governor to prepare a legislative districting plan following the decennial census and to present the plan to the presiding officers of the General Assembly in the form of a joint resolution on the first day of the regular session in the second year following the census. The Constitution further provides that if the General Assembly does not adopt another redistricting plan by the 45th day of the session, the Governor's plan as presented becomes law.
SJR 3/HJR3 were introduced on January 9, 2002, and became law on February 22, 2002, as the Legislative Districting Plan of 2002. While several alternative State redistricting plans were prepared and introduced as joint resolutions during the session, none passed. Litigation has been initiated by several members of the General Assembly challenging the constitutionality or legality of certain of the legislative districts as they are configured. On June 11, 2002 the Court of Appeals of Maryland ruled "significant portions of the Plan are not consistent with the requirements of ... the Constitution of Maryland ... and, for that reason, the Plan is in violation of the Maryland Constitution and invalid." Further the Court said, "this Court will endeavor to prepare a constitutional plan." And on June 21, 2002 the Court promulgated its own legislative districting plan.
SENATE BILL 805 – CONGRESSIONAL REDISTRICTING. The General Assembly is responsible for passing legislation that redraws the boundaries of the Maryland congressional districts after each decennial census and when new population data is available to accurately distribute the population among districts. Both the Maryland Constitution and the statutory law of the State are silent on the matter of congressional redistricting. The U.S. Congress has given state legislatures authority to redistrict congressional seats. The only federal statutory requirement is that congressional districts be single-member districts. The U. S. Supreme Court has consistently ruled that congressional districts must be created with as nearly equal population as practicable, with strict population equality thus being the rule. The plan to redistrict Maryland's congressional districts takes the form of a regular bill introduced in the General Assembly that must go through the legislative process in both houses. The bill must be signed by the Governor, who has veto power over it. The congressional redistricting plan introduced in 2002, SB 805 was also developed by the Governor's Redistricting Advisory Committee and submitted and passed as emergency legislation so as to take effect immediately upon the Governor's signing it into law.
As is the case with the State legislative districting plan that took effect on February 22, 2002, litigation has been filed challenging the Congressional districting plan.
SENATE BILL 494/HOUSE BILL 811 – ALCOHOLIC BEVERAGES DIRECT WINE SELLER’S PERMIT, create a direct wine seller’s permit that authorizes out-of-state permit holders to sell wine to Maryland consumers through the wholesale and retail tiers of the alcoholic beverages distribution system. The bills authorize each permit holder to sell up to 108 liters of wine annually to a single consumer and up to 900 liters of wine annually to all Maryland consumers. The permit holder must file an annual tax return, may not sell wine that is distributed by any licensed wholesaler or distributed in Maryland two years prior to the application for the wine seller’s permit is filed, and must ship the wine freight prepaid to a Maryland wholesaler. The wholesaler must then deliver the wine to a retail dealer. Wholesalers may charge consumers a fee of $2 per bottle or $4 per shipment, and retailers may charge consumers a fee of $5 per bottle or $10 per shipment. The bills do not authorize Internet shipping directly to consumers; however, this does not preclude permit holders from receiving orders on the Internet and shipping wine through wholesalers and retailers to consumers in Maryland.
HOUSE BILL 716 PROTEST AGAINST ALCOHOLIC BEVERAGE LICENSE RENEWAL, authorizes commercial tenants who are not holders of an alcoholic beverages license or applicants for any alcoholic beverages license to sign a petition of protest to a local board of license commissioners against the renewal of an alcoholic beverages license. If a protest that meets certain criteria is filed with the County Board of License Commissioners, the renewal of a license may not be approved by the Board without a hearing.
Note, the information contained in this legislative review is gleaned from writings of the Maryland Department of Legislative Services.
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