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Dabbs v. Anne Arundel County, MD.

Court of Special Appeals of Maryland

March 30, 2017


          Wright, Graeff, Bair, Gary E. (Specially Assigned), JJ.


          WRIGHT, J.

         This appeal arises from the Circuit Court for Anne Arundel County's entry of a declaratory judgment in favor of appellee, Anne Arundel County (the "County"), as to all counts and claims stated in a class action complaint filed against it on November 4, 2011, by appellants, William Dabbs, Sally Trapp, Samuel Craycraft, and Roberta Craycraft, "individually and on behalf of all others similarly situated." Appellants had sought refunds of impact fees that, following the fiscal year ("FY") of collection, were not expended or encumbered within six FYs. Following a hearing on November 20, 2014, and after receiving memoranda from the parties, the circuit court entered judgment in the County's favor on January 27, 2016, 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. On February 11, 2016, appellants noted this appeal.

         Questions Presented

         For clarity, we have combined, renumbered, and rephrased the questions presented by appellants, as follows:[1]

1. Did the circuit court err in concluding that the "rough proportionality" or "rational nexus" test established by the Supreme Court of the United States has no application to development impact fees?
2. Did the circuit court err in finding that the enactment of Bill No. 27-07 did not interfere with the vested rights of appellants to recover impact fee refunds?
3. Did the circuit court err in concluding that appellants could not recover as damages $9.9 million that the County transferred from the General Fund to the Impact Fee Special Fund in 2008?
4. In determining the appropriate use of impact fees under its Impact Fee Ordinance, is the County required to use the definition of "State Rated School Capacity" that the State applies for school construction funding purposes?
5. Did the circuit court err in denying appellants' motion for an accounting of County impact fee collections, expenditures, and encumbrances?
6. Did the circuit court err in finding that the prospective repeal in Bill No. 71-08 of the County's impact fee refund provision, codified in § 17-11-210(b), had no effect on appellants' vested rights to refunds?

         For the reasons that follow, we affirm the circuit court's judgment.


         I. The County's Impact Fee Ordinance

         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 ("County Code"), the County may 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. § 17-11-202(1).[2] Impact fees must be paid by any person who improves real property causing an impact on public facilities before a building permit for the improvement may be issued. §§ 17-11-203, 17-11-206.

         Under § 17-11-209(a), all funds collected from impact fees must be used for eligible capital projects, that is, capital projects for the "expansion of the capacity" of roads and schools, and not for replacement, maintenance, or operations. The County has been divided into impact fee districts and impact fees generally must be used for capital improvements within the "district from which they are collected." § 17-11-209(d). The County Planning and Zoning Officer ("PZO") determines the extent to which capital projects are eligible for impact fee use. See generally Impact Fee Ordinance.

         Section 17-11-210(b) provides that, if the impact fees collected in a district are not expended or encumbered within six FYs following the FY of collection, the County Office of Finance must give notice to current property owners that impact fees are available for refund. Section 17-11-210(e), however, allows the PZO to "extend for up to three years the date at which the funds must be expended or encumbered." Such an extension may be made "only on a written finding that within a three-year period certain capital improvements are planned to be constructed that will be of direct benefit to the property against which the fees were charged."

         The County began imposing impact fees in FY 1988. On December 20, 2001, the County Council enacted Bill No. 96-01, which, effective February 3, 2002, authorized the County to use impact fees for temporary structures (classrooms) provided they expanded the capacity of the schools to serve new development. Then, on May 22, 2007, the County Council enacted Bill No. 27-07, which codified the procedures which the County had utilized to count impact fee expenditures and encumbrances for purposes of determining impact fee refunds under § 17-11-210(b). Because Bill No. 27-07 did not effect a substantive change in policy, the County Council made Bill No. 27-07 retroactive to fees collected in FYs 1988-1996.

         On November 6, 2008, the County Council enacted Bill No. 71-08 and repealed, prospectively, the impact fee refund provisions previously set forth in § 17-11-210. The repeal was effective on January 1, 2009, and barred claims that were not ripe as of the effective date of the repeal, that is, the repeal barred claims for refunds of fees collected after FY 2002.

         II. Plaintiffs' Claims

         This action is the second lawsuit in which class plaintiffs have sought refunds of impact fees pursuant to § 17-11-210. In the first action, the circuit court ruled that it would only resolve claims for refunds of impact fees collected in FYs 1988-1996, namely the FYs that were ripe for review at that time. Halle Dev., Inc. v. Anne Arundel Cty., Case No. 02-C-01-069418. Thus, in 2011, appellants filed the present claim ("Dabbs"), seeking refunds of fees collected in and after FY 1997.

         A. Halle

         In 2008, this Court, in Halle, explained the manner in which § 17-11-210 should be applied to calculate whether impact fees are available for refund. Anne Arundel Cty. v. Halle Dev., Inc., No. 2552, Sept. Term, 2006 (Feb. 7, 2008, on reconsideration, May 7, 2008). We ruled that the County was entitled to count impact fee encumbrances in calculating refunds after the close of six FY periods and remanded the case to the circuit court for the purpose of recalculating refunds accordingly. Specifically, we rejected the County's argument that the case should be remanded to the PZO for new extension decisions, and we ruled that the County Code required any decision by the PZO to extend the period for using impact fees be validly made before the end of the six FY period. However, we agreed with the County that (1) in applying its procedure to count impact fees encumbered for the purpose of determining refunds, the County was not attempting to encumber impact fees "retroactively, " and (2) the County Code did not require the County to count impact fee encumbrances as part of the annual budget process and within the six FY period. We stated:

Owners contend that the circuit court's ruling is supported by the refund provisions in Code § 17-11-210. They argue that the County is attempting retroactively to encumber funds. They assert that the circuit court correctly ruled that for refund purposes a PZO determination that impact fee funds had been encumbered, must have been made within the six years following collection of the funds. This analysis confuses encumbrance with extension. As we have seen in Part I, supra, there was a time limit prior to which the fact-finding of extension must be made, and made in the required format, in order to effect an extension. Section 17-11-210 does not mandate any format for effecting an encumbrance.

Halle, Feb. 7, 2008 opinion at 19-20.

         We also rejected the circuit court's reliance on § 4-11-102(c)(11) for the proposition that impact fee encumbrances had to be counted as a part of the annual budget process, stating:

Code § 4-11-102(c)(11), also cited by the court and requiring the capital budget and capital program to include "any amounts encumbered and expended by April 1 of the current and prior year, " is satisfied by the current format of that budget and program, as described above. That information advises the County Council of matters of historic fact. The section does not require that encumbrances be recorded in the accounts of a particular impact fee special fund when those encumbrances are made in the future, during the fiscal year that is the subject of a particular capital budget.

Id. at 19. In short, we ruled:

Accordingly, we shall remand on the encumbrance issue for a determination of the amount of impact fees that had been encumbered, but unexpended, within six years following their collection.

Id. at 20.

         Thereafter, the County filed a motion for reconsideration requesting that this Court rule that the County was also entitled to count impact fees encumbered in connection with plaintiffs' claims for refunds of school impact fees. We granted the motion in a May 7, 2008 opinion, stating:

[In our February 7, 2008 opinion, ] we held that the circuit court erred in failing to include in the six-year test encumbrances made within a six-year period after the year of receipt in computing the debit against fee receipts.
* * *
This Court's rationale in its February 7, 2008 opinion with respect to transportation project encumbrances, argues the County, is equally applicable to the accounting record for encumbrances for school projects. Because we held in our February 7, 2008 opinion that the ground on which the circuit court relied in rejecting encumbrances as a setoff under the six-year test was erroneous, the court, on remand, should consider not only encumbrances for transportation projects, but for school projects as well when applying the six-year test.

Halle, May 7, 2008 opinion at 7-8.

         Although Bill No. 27-07, which codified the County's procedure for counting impact fee encumbrances, had been enacted prior to this Court's 2008 opinion and was retroactive, we ruled that the amended ordinance did not modify the concept of encumbrance which had been in the County Code from the enactment of Bill 58-87 in 1988, and thus, it was unnecessary to address the retroactivity of the legislation because it did not change law or policy.

         Following this Court's 2008 decision in Halle, both the County and the class plaintiffs filed petitions for a writ of certiorari in the Court of Appeals. The County requested that the Court review the Court of Special Appeals' ruling that the case could not be remanded to the PZO to make new extension decisions. The class plaintiffs, on the other hand, requested that the Court of Appeals review the Court's ruling that the County was not "retroactively encumbering" impact fees by utilizing the procedure (subsequently codified in Bill No. 27-07) to count them after the case had been filed. Plaintiffs argued that they had vested rights to an accrued cause of action to recover refunds after they filed suit on February 21, 2001, and thus, the case could not be remanded to permit the County to either grant new extensions, or count encumbrances.

         The Court of Appeals granted the County's petition. Anne Arundel v. Halle, 405 Md. 350 (2008). However, it denied plaintiffs' cross-petition, thus declining to review the encumbrances issue. The Court of Appeals then affirmed this Court on all issues for which it granted certiorari and explained that the class plaintiffs did not have vested rights which would preclude the County from counting encumbrances after the close of the six FY periods. Anne Arundel Cty. v. Halle Dev., Inc., 408 Md. 539 (2009). It stated:

This case is not about vesting. It is about the PZO's lack of authority under the impact fee ordinance to go back and make administrative decisions that it failed to effectively execute when permitted. Indeed, the Owners may not be vested in their right to a refund. Whether they are entitled to a refund and in what amount it will be determined by the Circuit Court on remand. The full refund amount determined by the Circuit Court may be reduced if the County is able to prove that it, in fact, encumbered the impact fee funds within six years.

Id. at 559. In an accompanying footnote, the Court of Appeals explained:

The Court of Special Appeals held in its May 7, 2008 unreported opinion that the Circuit Court, on remand, should re-determine the amount that the County had timely encumbered for eligible capital improvements, and in doing so, "should consider not only encumbrances for transportation projects, but for school projects as well when applying the six-year test." We did not grant certiorari as to this issue, and thus the decision of the intermediate appellate court is law in this case. Accordingly, the determination by the Circuit Court as to ...

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