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Congregation v. Mayor and City Council of Baltimore

Court of Special Appeals of Maryland

April 27, 2018

SHAAREI TFILOH CONGREGATION
v.
MAYOR AND CITY COUNCIL OF BALTIMORE

          Circuit Court for Baltimore City Case No. 24-C-15-002026

          Leahy, Reed, Shaw Geter, JJ. [*]

          OPINION

          LEAHY, J.

         "If the rain spoils our picnic, but saves a farmer's crop, who are we to say it shouldn't rain?"[1]

         This appeal swells out of the controversial law imposing stormwater remediation fees, commonly referred to as the "Rain Tax."[2] The law passed like a tidal wave through the General Assembly in 2012 to fulfill requirements imposed by the United States Environmental Protection Agency ("EPA") in order to reduce pollutants entering the Chesapeake Bay. Under the new state law, Maryland Code (1982, 2013 Repl. Vol.), Environment Law Article ("Envir."), § 4-202.1, [3] local jurisdictions subject to Phase I municipal separate storm sewer system permits ("MS4") were required to create watershed protection and restoration programs and establish stormwater remediation fees by July 1, 2013.

         The surge hit Baltimore City ("the City") in early 2013, when the City Council passed Ordinance 13-143, enacted into the Baltimore City Code as Article 27. Pursuant to Baltimore City Code, Art. 27, §§ 3-1(a) and 3-7(b)(1), the Baltimore City Department of Public Works ("DPW") was authorized to assess and collect a stormwater remediation fee ("Stormwater Fee") on all non-exempt properties within the City. For the third and fourth quarters of 2013, DPW charged $240 total per quarter for the three properties that are the subject of the underlying appeal, owned by Appellant Shaarei Tfiloh Congregation ("the Congregation").

         At the first level of administrative review, DPW denied the Congregation's demand to void the Stormwater Fee as an unconstitutional property tax in violation of the Congregation's rights under state and federal laws protecting the free exercise of religion. Still, DPW granted the Congregation a slight reduction in fees to $150 per quarter. The Congregation appealed DPW's decision to the Baltimore City Board of Municipal and Zoning Appeals ("the Board"), where the Congregation's constitutional challenge was also rejected. Thereafter, the Congregation sought judicial review of the Board's decision in the Circuit Court for Baltimore City, and the court affirmed the Board's judgment. Notably, however, the circuit court ruled that the Stormwater Fee was an excise tax rather than a fee but concluded that such a tax was authorized by the State's enabling law. The Congregation appealed to this Court and presents four questions for our review, which we have reworded and reordered slightly:[4]

1. Did the Board err in holding that the Stormwater Fees imposed under Article 27 of the Baltimore City Code were valid?
2. Did the Board err in holding that Article 27 is not a land use ordinance?
3. Did the Board err by ignoring the broad protections afforded religious institutions under Article 36 of the Maryland Declaration of Rights?
4. Did the Board err in failing to follow its own rules of procedure?

         We hold that the City acted within its authority under the state enabling law when it enacted Article 27 of the Baltimore City Code. We agree with the Congregation that despite its name, the Stormwater Fee is a tax because its primary purpose is to raise revenue and because property owners' only obligation under the statute is to pay the charge. However, we hold that the Stormwater Fee is an excise tax, rather than a property tax, because it is based on the particular use of the property, not the value of the property or property ownership. We also hold that Article 27 does not violate the Free Exercise Clause of the Maryland Declaration of Rights and does not implicate the Religious Land Use and Institutionalized Persons Act of 2000 ("RLUIPA"). Finally, we discern no failure by the Board to follow its established procedures.

         BACKGROUND

         Stormwater management undertakes to reduce stormwater runoff's adverse effects on rivers and streams and to protect the public's safety. See Envir. § 4-201. Stormwater runoff continues, however, to be a major source of the pollution that flows into the Chesapeake Bay-the largest estuary in the United States. See EPA, Addressing Nutrient Pollution in the Chesapeake Bay, https://www.epa.gov/nutrient-policy-data/addressing-nutrient-pollution-chesapeake-bay (last visited Apr. 14, 2018). The federal mandate to protect the Chesapeake Bay and the cascading laws enacted by the State and the City set the course for the case before this Court.

         A. Statutory Framework

         1. Federal Law

         Amid growing concerns of increased water pollution, Congress passed the Federal Water Pollution Control Act of 1972, known as the Clean Water Act ("CWA"), which is codified with amendments at 33 U.S.C. § 1251 et seq. (2012). The CWA's purpose "is to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." Id. § 1251(a). Administered by the EPA, the CWA, among other things, prohibits the discharge of pollutants without a permit into the navigable waters of the United States.[5]Id. § 1342(a)(1).

         The EPA issues permits for such discharges via its National Pollutant Discharge Elimination System ("NPDES"). Id. § 1342(a). Pursuant to statute, the EPA may, however, delegate its permit-issuing authority to a state government if the EPA accepts that state's proposed permit program. Id. § 1342(b). The EPA Administrator approved Maryland's NPDES permit program on September 5, 1974. See 57 Fed. Reg. 43, 734. Consistent with this grant of authority, the Maryland Department of Environment ("MDE") may issue the various NPDES permits in Maryland. Code of Maryland Regulations ("COMAR") 26.08.04.07.

         Although the CWA focused initially on water pollution from industrial sources, Congress amended it in 1987, requiring the regulation of MS4 (municipal separate storm sewer system) stormwater discharge. See Pub. L. No. 100-4, 101 Stat. 7 (1987); see also Md. Dep't of Env't v. Anacostia Riverkeeper, 447 Md. 88, 96-97 n.3 (2016). The EPA issued its NPDES MS4 stormwater regulations for "Phase I" jurisdictions in 1990 and for "Phase II" jurisdictions in 1999. 55 Fed. Reg. 47, 990; 64 Fed. Reg. 68, 722. As delineated by the EPA, Phase I regulations apply to "large" jurisdictions, classified as those with populations over 250, 000 people, and "medium" jurisdictions, those having between 100, 000 and 250, 000 inhabitants. 55 Fed. Reg. 47, 990. Phase II regulations apply to those jurisdictions with populations up to 100, 000 residents. 64 Fed. Reg. 68, 722. In December 2010, the EPA issued the Chesapeake Bay Total Maximum Daily Load ("TMDL"), a cap on the amount of pollutants related to nutrients-like nitrogen and phosphorus-and sediment that can be discharged into the Chesapeake Bay and its tributaries.[6] 76 Fed. Reg. 549.

         2. Maryland Law

         The purpose of Maryland's stormwater management subtitle is codified in Envir. § 4-201. That section announces the General Assembly's findings:

The General Assembly finds that the management of stormwater runoff is necessary to reduce stream channel erosion, pollution, siltation, and sedimentation, and local flooding, all of which have adverse impacts on the water and land resources of Maryland. The General Assembly intends, by enactment of this subtitle, to reduce as nearly as possible the adverse effects of stormwater runoff and to safeguard life, limb, property, and public welfare.

Envir. § 4-201.

         On March 30, 2012, Maryland submitted its Phase I Watershed Implementation Plan ("WIP") to the EPA, which provided details on how it would reduce nitrogen and phosphorus from all major sources, including stormwater runoff. Dep't of Legislative Servs., Fiscal Note, H.B. 987, at 5 (2012). The development of a system of charges by local governments was necessary to fund the estimated cost of implementing the stormwater management controls needed to achieve the TMDL. Id. at 7-8. Accordingly, the General Assembly passed H.B. 987, amending Envir. § 4-201.1 and adding Envir. § 4-202.1, and the Governor signed the legislation into law in 2012. 2012 Md. Laws, ch.151 (H.B. 987). The new law required those jurisdictions subject to an NPDES MS4 Phase I permit-the ten largest jurisdictions in Maryland, including the City[7]-to pass legislation establishing a watershed protection and restoration program by July 1, 2013. Id. § 4-202.1(a)(1), (b). The 2012 law also required these jurisdictions to impose a Stormwater Fee and create a local watershed protection and restoration fund.[8] Id. § 4-202.1(c). The legislature specified how to assess a Stormwater Fee:

(3)(i) A county or municipality shall set a stormwater remediation fee for property in an amount that is based on the share of stormwater management services related to the property and provided by the county or municipality.
(ii) A county or municipality may set a stormwater remediation fee under this paragraph based on:
1. A flat rate;
2. An amount that is graduated, based on the amount of impervious surface on each property; or
3. Another method of calculation selected by the county or municipality.

Envir. § 4-202.1(e)(3).

         As we explain next, the City adopted a combination of these statutorily prescribed methods when it assessed Stormwater Fees on the non-exempt properties within its jurisdiction.

         3. The City's Law and Regulations

         The City's stormwater management infrastructure was largely installed before 1950, and with the increased visibility of environmental concerns, much of the City's focus on stormwater management has shifted to promoting projects to enhance water quality. See Balt. City Dep't of Pub. Works, Stormwater Management, https://publicworks.baltimorecity.gov/stormwater (last visited April 14, 2018). Yet five watersheds within City limits are still considered impaired. Balt. City Dep't of Pub. Works, Balt. City MS4 Restoration and TMDL WIP v (2015). Over 45% of the City's surfaces are impervious, meaning stormwater runoff is voluminous and its management is key.[9] Id. The costs of stormwater management services has increased significantly. See Md. Dep't of Env't, Report on Stormwater Management Act of 2007 1-2 (2008).

         In 2013, following the mandate contained in Envir. § 4-202.1, the Baltimore City Council adopted Article 27, entitled "Stormwater Remediation Fees", which became effective on July 1, 2013. Baltimore City Code, Art. 27 [hereinafter "Art. 27"]. The purpose of the City's Watershed Protection and Restoration Fund ("the Fund") was "to finance the costs of improving the City stormwater management system, including its watershed protection and restoration program." Id. § 2-1. The Fund supports the operation of the City's stormwater management system; its permitted uses are enumerated as follows:

Money in [the Fund] may be used for the following purposes only:
(1) capital improvements for stormwater management, including stream and wetland restoration projects;
(2) operation and maintenance of the City stormwater management system and facilities;
(3) public education and outreach relating to stormwater management or stream and wetland restoration;
(4) stormwater management planning, including:
(i) mapping and assessment of impervious surfaces; and
(ii) monitoring, inspection, and enforcement activities to carry out the purposes of the Fund;
(5) to the extent that fees imposed under the authority of [Envir. § 4-204] are deposited into the Fund, review of stormwater management plans and permit applications for future development;
(6) grants to nonprofit organizations for up to 100% of a project's costs for watershed restoration and rehabilitation projects relating to:
(i) planning, design, and construction of stormwater management practices; (ii) stream and wetland restoration; and
(iii) public education and outreach related to stormwater management or stream and wetland restoration;
(7) reasonable costs necessary to administer the Fund; and
(8) any other use authorized by [Envir. § 4-202.1].

Id. § 2-3.

         As directed under Envir. § 4-202.1(e)(1), the City imposed a Stormwater Fee on all properties located within its boundaries, subject to certain exemptions.[10] Id. § 3-1(a)-(b). The City divided all non-exempt properties into two categories-single-family properties and all other properties-and it calculated fees according to the amount of impervious surface on a property.[11] Id. §§ 3-2, 3-3. For single-family properties, the City created a tiered system, defining three categories of impervious surface areas on which it would assess a Stormwater Fee at a flat rate.[12] Id. § 3-2(b)(1)-(2). For all other properties, the City assesses $15 per quarter per Equivalent Residential Unit ("ERU")-with one ERU equaling 1, 050 square feet of impervious surface.[13] Id. §§ 3-3(b), 3-4(a), (c). The City also established a minimum fee of one ERU for these non-residential, non-exempt properties. Id. § 3-3(d). Qualifying religious organizations, however, were assessed at $12 per ERU per annum for structures owned by them so long as the property was tax-exempt in both Maryland and the City and the structures on the property were used exclusively for worship or schooling.[14] Id. § 3-3(e)(3). Therefore, rather than being charged $60 per year per ERU, these properties are charged $12 per year per ERU.

         Article 27 provides that the assessment of the base fee, based on the impervious surface area of the property, be measured "at the sole discretion of the Director of Public Works" using several methods for measurement, including geographic information systems analysis of aerial photographs, field surveys, and as-built engineering drawings. Id. § 3-3(c)(1). DPW is authorized to bill the fees and may include them on water bills or on a separate bill. Id. § 3-7(b). The fees, and any applicable interest and penalties, constitute a personal debt of the property's owner and creates a lien on the property in favor of the City. Id. § 3-8(a)-(b).

         DPW promulgated regulations in connection with the Stormwater Fee in September 2013. It clarified that it would use aerial photographs and Maryland's property tax database to determine the amount of ERUs on each non-exempt property and stated that the fee would appear as a line item on the quarterly water bill. DPW Stormwater Fee Rec. Reg. (II)(c), (IV)(A)(i) [hereinafter "DPW Reg."]. The regulation defined "non-single-family property" to include property owned by religious institutions but set the fee for these institutions' qualifying properties at the reduced rate of $12 per ERU, as required by Article 27. DPW Reg. (I)(i), (III)(b). To receive the reduced fee, the regulation required a religious organization to "submit an application provided by [DPW] that identifies the structures with uses considered eligible for the reduced fee. The application . . . must be renewed every 3 years." DPW Reg. (III)(b)(iii). Additionally, DPW created a system for fee credits but stated that those credits could apply only to the portions of a religious institution's property that did not receive a reduced fee. DPW Reg. (III)(b)(ii).

         Any property owner aggrieved by the Stormwater Fee may seek redress before the Director of DPW within 30 days of the bill's date so long as the appeal is in writing and contains all information required by any rules and regulations adopted under Article 27. Art. 27 § 4-1(a). If unsatisfied with the result, the property owner may appeal to the Board within 30 days of DPW's decision. Id. § 4-1(b). After the conclusion of this administrative review, a property owner may petition for review in the circuit court and subsequently this Court, in accordance with Maryland procedural rules. Id. § 4-2.

         B. The Congregation's Administrative Challenges 1. Contest to DPW

         For the third and fourth quarters of 2013, the City issued water bills to the Congregation for three properties-the main synagogue at 2001 Liberty Heights Avenue ("the Liberty Heights Synagogue"), a second synagogue at 3523 Holmes Avenue ("the Holmes Synagogue"), and a parking lot at 3515 Woodbrook Avenue ("the Parking Lot") (collectively, the "Properties"). Each bill contained a "Maryland Stormwater Fee" line item: $150.00 for the Liberty Heights Synagogue, $15.00 for the Holmes Synagogue, and $75.00 for the Parking Lot, totaling $240 for all three properties per quarter.

         The Congregation challenged the imposition of the Stormwater Fee in a letter to the City's Bureau of Water and Wastewater dated February 27, 2014. Classifying the Stormwater Fee as a property tax, the Congregation asserted that the Properties were exempt from the Stormwater Fee because they were used for public religious worship and exempt from property taxes under Maryland Code (1985, 2012 Repl. Vol.), Tax-Property Article ("Tax-Prop."), § 7-204. The Congregation demanded that DPW void the fees and issue a full refund, contending that "the assessment is an unconstitutional burden upon the free exercise of religion [] in violation of the First Amendment of the United States Constitution and the Maryland Declaration of Rights." Alternatively, the Congregation sought a fee reduction to be applied retroactively.

         On May 29, 2014, in a letter signed by the Director, DPW denied the Congregation's request to void the fees, explaining that "Baltimore City is one of ten jurisdictions mandated to implement a stormwater remediation fee by [Envir. § 4-202.1], which does not provide exemptions for tax-exempt entities." However, pursuant to Article 27 § 3-3(e)(3), the Director granted the reduction for qualifying religious organizations. He reduced the fee from $150 to $60 per quarter for the Liberty Heights Synagogue, lowering the Congregation's total quarterly bill from $240 to $150. Although the Holmes Synagogue qualified as a religious structure, the Director explained that its "fee has not been reduced as doing so would lower the fee beyond the legislated minimum charge of 1 ERU per quarter." The Director also determined that the Parking Lot did not qualify for a fee reduction because it did not contain any structures, including religious structures. Analogizing the ...


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