Don’t Be Left High and Dry on Water Protection Credits

By: Chris Mincher


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Pursuant to State law and the Municipal Separate Storm Sewer System permits (more commonly called “MS4 permits”) from the Maryland Department of the Environment, local governments have a number of responsibilities for handling stormwater runoff. Taxes, fees, and charges to property owners have become a common way of raising funds for these projects. Jurisdictions have different methods of going about getting this money while also trying to incentivize private owners to address the issue themselves.

Montgomery County, for example, levies a “Water Quality Protection Charge” as part of tax bills for all property owners that is based on the “potential” for the property to contribute to runoff; however, the County also offers a credit of up to 80 percent to those that implement “stormwater management practices.” There can be many devils lurking within the details of programs like these. As was demonstrated in the recent Appellate Court case of Battley v. Montgomery County, in that jurisdiction, who actually qualifies for credits can be tricky, and good-faith efforts by property owners to responsibly address runoff won’t necessarily qualify unless certain boxes are checked.

The dispute involved Lindbergh Park, a commercial development in Gaithersburg made up of individually owned lots. To manage stormwater, three ponds were placed on five of the properties, with the other lots containing grading and infrastructure to channel the water into the ponds. The park’s ownership association, which all owners pay fees to, maintains this system.

Eligibility for a credit against the Water Quality Protection Charge is available for properties that contain a privately maintained “stormwater management system” that treats drainage in the development. Arguing that they all contributed to the park’s stormwater management system, the owners sought the credits — but only the five properties with the treatment ponds got them. Reviewing the county’s regulations, the Appellate Court expressed sympathy for the owners “whose properties do not contain the ponds and yet have shared in their costs,” but still agreed the denials were the correct result.

The text of the ordinances themselves was the starting point: The credit was available to a property owner if “the property contains a stormwater management system.” By regulation, the credit is calculated based on the volume of water “treated” by the stormwater management system. The panel read these provisions as requiring the treatment to occur on the property owned by the applicant; no one was suggesting that drainage systems to convey the runoff (pipes, channeling, grading, etc.) actually treat the water. That occurred in the ponds that were a part of the five qualifying properties. The calculation of the credit for the other properties would therefore be zero.

The property owners’ argument wasn’t a bad one: At least how the regulation is currently written, it’s not obvious from its plain language that a property couldn’t be eligible for containing part of a stormwater management system, or that the credit couldn’t be calculated based on the treatment of the water elsewhere in the development. Certainly those concepts would seem to jive with the policy behind the credits. One would think— especially in areas with many small, separately owned lots — it would be preferable, and certainly more efficient, to have adjoining properties collaborate to implement collective stormwater management systems.

As is nearly always the case, private parties whose dealings rely on uncertain regulations should address that uncertainty beforehand. Here, hopefully the association’s policies and the owners’ agreements with each other have a mechanism for fairly splitting the credits received for the ponds among all properties that contribute to the stormwater management system. Step one in these situations is to accurately identify regulatory ambiguities upfront; step two is to craft the appropriate contingencies. By taking these measures, a party can ensure it’s not left holding the bag if a later legal interpretation doesn’t go its way.