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Victoria Falls Committee for Truth in Taxation, LLC v. Prince George's County

Court of Appeals of Maryland

March 21, 2014


Argued: February 11, 2014

Circuit Court for Prince George's County Case No. CAL 11-12645

Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, Watts, JJ.


Harrell, J.

We consider here a challenge by Petitioners, the Victoria Falls Committee for Truth in Taxation, LLC (the "Taxpayers"), to a resolution enacted by the Respondent, Prince George's County, Maryland (the "County"), creating the Victoria Falls Special Taxing District (the "Special Taxing District" or the "District"), under authority granted by a State enabling act (the "Act"), Maryland Code (1957, 2011 Repl. Vol.), Art. 24, § 9-1301. We hold that the State Legislature did not intend, by the plain language of subsection § 9-1301(h)(3)(ii), to require that the County determine whether any change in land ownership (occurring after the time of application for creation of the District, but before final action on the application) may have affected the super-majority landowner(s) requirement, expressed in subsection § 9-1301(d)(1) of the Act, for applying for the District. Furthermore, we hold that the County's approval of the request to create a Special Taxing District that did not include 25 of the 609 lots within the planned Victoria Falls community, was lawful under the Act's requirement that the District be used to finance infrastructure improvements in "any defined geographic region within the county." Accordingly, we affirm the judgments of the Maryland Tax Court, the Circuit Court for Prince George's County, and the Court of Special Appeals on both grounds.


On 10 March 2005, five applicants filed jointly a written request (the "Request"), with then Prince George's County Executive Jack B. Johnson and the Prince George's County Council (the "Council"), to create and recognize a voluntary special taxing district for Central Parke at Victoria Falls ("Victoria Falls"), a planned retirement community in Laurel, Maryland. The five applicants were the developer of the community and the four entities under contract to buy the lots and construct the dwellings for sale in the community (collectively, the "Applicants"). The developer was The Pines of Laurel, LLC (the "Developer"), and the four home builders were Michael Harris Development, LLC, Sturbridge Victoria Falls, LLC, V Falls, LLC, and the Drees Company (collectively, the "Builders").

At the time the Applicants filed the Request, the Victoria Falls community was already under construction. Of the 609 residential units planned to be in Victoria Falls, twenty-five dwellings and their lots, which were scattered throughout the community, were sold by the Applicants before the filing of the Request. Those twenty-five units (and the lots on which they were situated) were not included within the confines of the proposed District. As a result, the plat submitted with the Request describes the geographic region as excluding graphically the twenty-five units that were sold already, some of which shared property lines or common walls with one or more of the 584 units within the proposed District. Consequently, the owners of those twenty-five units or lots were not among the Applicants. The five Applicants owned 100 percent of the property constituting the proposed District when they filed with the County the Request for its creation.[1]

The purpose for seeking creation of the Special Taxing District was to transfer (or seek reimbursement of) the cost of public infrastructure improvements within Victoria Falls from the Applicants to the parties purchasing the dwelling units to be constructed. Approximately seventy-five percent of the public infrastructure had been completed by the Developer prior to the filing of the Request. The Applicants requested the issuance and sale by the County of special obligation bonds in an aggregate principal amount of up to $12 million, to be repaid by the ultimate owners of property within the proposed District, through payment of the Special Taxes, over a 30-year term. Although it appears that all 609 units within Victoria Falls would benefit from the infrastructure improvements, only the 584 units within the proposed District would be assessed a special tax to repay the bonds. The owners of the twenty-five excluded properties would be responsible otherwise, however, for paying deferred water and sewer charges.

The County Executive reviewed the Request before its consideration by the Council. The Applicants supplemented the Request with an Economic Benefit Analysis, which estimated that tax revenues assessed and collected by the County on the Victoria Falls community and its residents would result in a cumulative revenue surplus for the County of approximately $88.5 million, after deducting the estimated County expenditures for on-going governmental services to the community and its expected residents. The Developer and the County Executive executed a Letter of Intent identifying $9, 465, 098 in routine public infrastructure improvements and budgeted costs associated with the District. Prior to filing the Request and executing the Letter of Intent, the Developer had posted a bond or bonds to cover the cost of all of the public infrastructure improvements, as a condition for recordation of the approved final subdivision plat, without which the development could not have begun.

When the Request reached the Council, the Applicants explained that their initial bank loan was near its maximum loan limit and they were requesting the special obligation bonds to prevent the delay and reduction of the scope of certain amenities and landscaping within the District, as well as remaining offsite work and other improvements. Moreover, a report supplied on the Applicants' behalf to the County noted that the cumulative amount of the Special Taxes on each property would not exceed the value of the benefit to the property resulting from the infrastructure improvements, and that the Special Taxes were allocated such that each parcel within the District would be taxed proportionally to the likely benefit it would receive. The County Executive noted that the financing of the improvements under the proposed District would "ensure the development of a first-rate age restricted residential community." As a further supplement to the Request, a document, entitled Bond Financing Projection No. 14, was supplied, which projected how the proceeds of any bonds issued subsequently by the County would be used and financed by the taxpayers within the District.

On 23 June 2005, the County Executive recommended to the Council the creation of the District. The Council introduced the County Executive's proposal as "CR-49-2005- A Resolution Concerning Victoria Falls Special Taxing District" (the "Resolution"). The Resolution was referred to the Council's Public Safety and Fiscal Management Committee (the "PSFM Committee"). The PSFM Committee recommended favorably to the full Council, on 13 July 2005, the proposed Resolution. On 14 July 2005, the Council published, in four local newspapers, identically-worded notices of a 26 July 2005 public hearing before the Council regarding the Resolution. At the hearing on 26 July 2005, none of the Taxpayers, or any other persons, spoke in opposition to the creation of the District. The Council adopted the Resolution. On 29 July 2005, the County Executive approved the Resolution, and it became effective on that date. The Resolution authorized special obligation bonds in an aggregate principal amount not to exceed $12 million for the financing of (and the reimbursement of expended costs for) the infrastructure improvements in the Victoria Falls community, and levied a special tax on the property owners within the District.

The Resolution created also rates and methods for the apportionment of the Special Taxes. It addressed initial tax rates for the different property types within the District for the 2005-2006 tax year, [2] mandated two-percent rate increases on a yearly basis, provided for a back-up tax on undeveloped properties if developed properties did not produce sufficient tax revenues, and provided for the termination of the Special Taxes in the District on 30 June 2035, unless the bonds were repaid fully prior to that date.

Following the enactment of the Resolution, the County issued special obligation bonds, in the fall of 2005, in the principal amount of $12 million, and collection of the Special Taxes commenced to retire the bonds.

The Applicants continued to market homes in Victoria Falls between the filing of the Request on 10 March 2005 and the effective date of the Resolution on 29 July 2005. Specifically, they entered into fifty-nine contracts with certain of the Taxpayers for the sale of property included within the District, some of which went to closing before, and some after, the Resolution became effective on 29 July 2005. Thirty-nine purchasers closed prior to the Council's adoption of the Resolution on 25 July 2005, [3] at which time forty-four property owners existed in the proposed District—the thirty-nine above-mentioned purchasers and the five Applicants. Some of the Taxpayers who became ultimately legal owners of property within the District after its creation had binding sales contracts in place before the Applicants filed the Request with the County.

During the time period between the filing of the Request and the enactment of the Resolution, the County was aware of the ongoing marketing and sales activities by the Applicants of properties within the proposed District. To address concerns raised by members of the PSFM Committee concerning notice of the implications of the proposed Special Taxing District to current and future property owners in the District, the Developer submitted a Memorandum to the Council, dated 10 June 2005, describing the Developer's policies for notifying purchasers of property within the District. Purchasers of property within the District all received at least one form of disclosure of the Special Taxes, with some purchasers receiving as many as nine separate disclosures. The number and type of disclosures received varied according to the time period in which particular purchases transpired. The disclosures of relevance in the present case are those provided to the thirty-nine purchasers who became new legal title owners of property before the County adopted the Resolution creating the Special Taxing District. Those disclosures were presented to each of the thirty-nine purchasers in a document titled "Addendum to New Home Sales Contract" ("Addendum"), which the sales agents included in the closing documents of each sale. Each of the thirty-nine purchasers executed an Addendum, in the process of closing on the purchase of their property, prior to the creation of the District. The form of each Addendum read, in pertinent part:

The Development is proposed to be located within the Victoria Falls Special Assessment District (the "Special Assessment District"), a special taxing district which may be created by Prince George's County. If the development becomes subject to the Special Assessment District taxing scheme, each owner of a lot or home in the Development will be liable to pay annually any special assessment and/or special tax imposed under Chapter 10-269 of the Prince George's County Code (the "Special Assessment District Assessment").[4] As of the date of these disclosures, the rates or amounts of the Special Assessment District Assessment have not yet been set by the County, but, if the Special Assessment District is established, the amount assessed will be set at a fixed rate each year, resulting in an estimated Special Assessment District Assessment for the initial year (commencing in fiscal year 2005) to be approximately $1, 300.00 to $1, 600.00 for a single family detached house; however, such amounts are estimates only and are subject to change. Homebuyer shall be liable to pay the full amount of the Special Assessment District Assessment actually assessed from time to time against the property. The Prince George's County Council may increase the rate of any special tax or principal of, interest on and any redemption premium on any bonds which are to be issued by the County for the Special Assessment District and to replenish the debt service reserve fund for such bonds. The Special Assessment District Assessment would commence in the amount specified above with respect to all lots on a specified date after the bonds are sold by the County for the Special Assessment District (the "Commencement Date"). The Special Assessment District Assessment would terminate (except as to any unpaid Special Assessment District Assessments, interest, costs, late fees, and/or attorneys' fees) on the date that the bonds have been paid in full. For further information on the Special Assessment District Assessment, a purchaser of a Lot may contact Mr. Thomas L. Kozeny at 703-426-9532.[5]

Shortly after commencement of collection of the Special Taxes, a group of Taxpayers formed an umbrella organization, the Victoria Falls Committee for Truth in Taxation, LLC.


In April 2008, 272 Taxpayers (no Applicant was a part of this group) within the Special Taxing District filed suit in the Circuit Court for Prince George's County, in the name of their umbrella organization, alleging that the County was taxing them illegally, and seeking declaratory and injunctive relief and a refund of taxes paid. The County removed the case to the United States District Court for the District of Maryland, sitting in Greenbelt, Maryland. That court remanded the case to the Circuit Court, after which the homeowners acquiesced in the County's demand that they proceed via tax refund applications, rather than the pending lawsuit. Thus, the original action in the Circuit Court was dismissed.

On 31 December 2008, 279 Taxpayers within the District filed a tax refund application with the County. The County denied the application on 2 June 2009. The Taxpayers filed timely a Petition of Appeal with the Maryland Tax Court on 15 September 2009. On 22 April 2010, 46 additional Taxpayers, whose refund claims the County denied also, filed a second Petition of Appeal. The Tax Court consolidated the two Petitions.

On 27 January 2011, following the filing of briefs and a stipulated record, the Tax Court heard oral argument from the parties. The Tax Court issued a Memorandum and Order denying Taxpayers' claims on 11 May 2011. The Taxpayers filed timely a Petition for Judicial Review in the Circuit Court for Prince George's County. Following briefing and argument on 9 November 2011, the ...

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