Dabbs v. Anne Arundel County

Wright, J. This appeal arises from the Circuit Court for Anne Arundel County’s entry of a declaratory judgment in favor of appellee, ³¹⁸ 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? ³¹⁹ 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-ll-210(b), had no effect on appellants’ vested rights to refunds? For the reasons that follow, we affirm the circuit court’s judgment. Facts 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-ll-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. ³²⁰ Section 17-ll-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-ll-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-ll-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- ³²¹ 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- ³²² 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)(ll) for the proposition that impact fee encumbrances had to be counted as a part of the annual budget process, stating: Code § 4-ll-102(e)(ll), 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. [[Image here]] This Court’s rationale in its February 7, 2008 opinion with respect to transportation project encumbrances, argues the ³²³ 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 , 952 A.2d 225 (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 ex ³²⁴ plained 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 , 971 A.2d 214 (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 , 971 A.2d 214 . 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 the amount of the refund may be modified on remand, and the Owners’ rights in any specific refund award are not vested.

Id. at 559 , 971 A.2d 214 n.7 . On remand, the circuit court stated that this Court’s 2008 opinion in Halle was the law of the case and, in applying our mandate, reduced the amount of refunds from $4.7 million to $1.3 million. The circuit court, however, stated that it disagreed with part of our opinion, and instead it expressed continued belief that the County was not entitled to count encumbrances because the County was required to do so during the FYs under review as a part of the annual budget ³²⁵ process. To that end, the circuit court invited the Court of Appeals to review the issue of encumbrances.

The circuit court then made certain “alternate findings” in the event that the Court of Appeals decided to review the case. Subsequently, the plaintiffs filed a petition for writ of certio-rari, asking the Court of Appeals to again review whether the enactment of Bill No. 27-07 interfered with their vested rights. The Court of Appeals, however, declined to do so, and this Court, in 2013, affirmed the circuit court’s final judgment ruling that our 2008 opinion was the law of the case. Halle Dev., Inc. v. Anne Arundel Cty., No. 0327, Sept. Term, 2011 (July 29, 2013).

We stated: In its March 25, 2011 opinion, the circuit court correctly ruled that our prior holdings in this case—and the prior holdings of the Court of Appeals in this case—are the law of the case which are binding on the circuit court. [[Image here]] The circuit court ruled in its December 30, 2004 opinion that the definition of impact fees encumbered, and the County’s procedure for counting encumbrances was reasonable and lawful. The circuit court, however, also ruled that the County could not retroactively count encumbrances because the impact fees must be counted “as part of the annual budget process, no later than the sixth fiscal year.” On appeal, we held that the County was not “attempting retroactively to encumber funds.” Accordingly, we ordered “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.” Similarly, in remanding the case to the circuit court, the Court of Appeals observed that: [T]he circuit court’s task on remand will only require that the court determine whether and how much refund is due, in total, after considering all impact fee amounts that the County has timely encumbered for eligible capital projects. ³²⁶ Anne Arundel Cnty. v. Halle Dev., Inc., 408 Md. 539, 571-72 , 971 A.2d 214 (2009). The Court of Appeals also pointed out that: 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 the amount of the refund may be modified on remand, and the Owners’ rights in any specific refund award are not vested.

Id. at 559 , 971 A.2d 214, n.7 (emphasis added). Here, Owners raise issues relating to the determination of impact fee encumbrances to determine refunds. As set forth, swpra, our comprehensive 2008 opinion addressed this issue as a question of law. Accordingly, the circuit court was bound by the law of the case as to this legal issue.

Id. at 4-6. We also determined that plaintiffs’ argument that the retro-activity provision in Bill No. 27-07 unconstitutionally interfered with their vested rights was barred by the law of the case doctrine: Next, Owners argue that Bill 27-07 “operates retrospectively to divest and adversely affect vested rights, impacts the obligation of contracts, and violates the due process clause.” Owners further argue at length that the County Council “was not permitted to retroactively modify the County’s impact fee ordinance, by design, and reduce the amount of impact fees refunded 20 years after the events here have occurred.” The County argues that these arguments are barred under the law of the case doctrine. We agree with the County that the law of the case doctrine ³²⁷ precludes re-litigation of these issues. The circuit court, therefore, did not err in applying the law of the case in determining impact fee encumbrances. * * * We also observed in our prior opinion that the retroactivity provision of Bill No. 27-07 was not relevant to the case.

In particular, we cited the definition of an “encumbrance” as set forth in § 17-11-201(2) of the County Code. At that time we observed that, “[although this statutory definition, enacted by Council Bill No. 27-07, was not effective until May 22, 2007, long after the events with which we are concerned here, the definition conforms to generally accepted accounting principles (GAAP).” Further, we pointed out that we had no occasion to consider the validity of the retroactivity provision of the amended ordinance because the only relevant issue was the definition of “encumbrance,” and the ordinance was cited “simply to state the pre-existing, generally accepted meaning of the term, ‘encumbrance[.]’ ” Thus, we have already defined—as a matter of law—the definition of “encumbrance” that governs this case. Additionally, we have previously held that the retroactivity provision of Bill 27-07 is not implicated, and does not alter how impact fee encumbrances are counted for purposes of this case. Id. at 11-12.

Finally, we noted that the Court of Appeals had rejected the class plaintiffs’ claim that they had obtained vested rights in impact fee refunds by bringing their lawsuit in 2001: Moreover, the Court of Appeals has made clear that the retroactivity provision of Bill 27-07 is of no consequence here. As a threshold matter, we point out that, as the circuit court aptly observed, the key issue in a retroactivity analysis is whether Owners have “vested rights” in their claims for impact fee refunds. “If the legislature intends a law affecting substantive matters to operate retroactively and the law does not offend constitutional limitations or restrictions, it will be given the effect intended.[”] State Comm’n ³²⁸ on Human Relations v. Amecom Div. of Litton Sys., Inc., 278 Md. 120, 123 , 360 A.2d 1 (1976). In conducting the retroactivity analysis, a court must determine whether the retroactive application of the statute or ordinance would interfere with vested rights. Rawlings v. Rawlings, 362 Md. 535 , 766 A.2d 98 (2001).

Here, the Court of Appeals held that the instant case was not about vested rights, and that Owners had no vested rights in impact fee refunds: 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 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 will be determined by the Circuit Court on remand.

The full refund amount determined by the Circuit Court on remand may be reduced if the County is able to prove that it, in fact, encumbered the impact fee funds within six years. [[Image here]] Anne Arundel County v. Halle Dev., Inc., 408 Md. 539 , 971 A.2d 214 ; id. at 559, n.7 , 971 A.2d 214 (emphasis added). Id. at 12-13. B. Dabbs In the present case, involving impact fees collected in FYs 1997-2002, appellants sought refunds on the ground that the impact fees were not expended or encumbered in a timely manner under § 17-ll-210(b). Appellants also argued that the amendments to the Impact Fee Ordinance in Bill No. 27-07 and Bill No. 71-08 unconstitutionally interfered with their vested rights in refunds.

After hearing from the parties, the circuit court ruled that the County had applied the Impact Fee Ordinance as required by this Court’s 2008 opinion and found that there are no impact fees available for refund under § 17-11-210. Further, the circuit court rejected appellants’ constitutional and state law challenges to the Impact Fee Ordinance, ³²⁹ finding that most of the challenges had already been resolved against the class plaintiffs in Halle . More specifically, the circuit court found that the County prepared the six FY charts in the format approved by the Halle courts, properly comparing the amount of impact fees collected in each FY and district under review to the amount of impact fees expended (disbursed) and encumbered as of the end of the sixth FY following the FY of collection. Kurt Svendsen, the County’s Assistant Budget Officer, who had been employed by the County since September 1, 1997, was responsible for (a) the preparation of the County’s Capital Budget portion of the Annual Budget and Appropriation Ordinance, and (b) the monitoring of encumbrances and expenditures recorded in connection with appropriations for capital projects.

Because Svendsen monitored expenditures and encumbrances recorded against appropriations of capital projects on an almost daily basis, he was delegated the responsibility for conducting the six FY test under § 17-l-210(b). In the present case, the County prepared six FY charts for FYs 1997-2002 in the same manner as the charts prepared in Halle for FYs 1988-2002, but also included impact fee expenditures on temporary classrooms. 3 The charts indicated that all impact fees collected in FYs 1997-2002 were expended or encumbered within six FYs following the FY of collection and, thus, no impact fees collected in these FYs were available for refund. 4 ³³⁰ Lastly, the circuit court found that, in applying the six FY test, the County properly interpreted the term “impact fees encumbered” in § 17-ll-210(b) to mean: (1) the amount of impact fees collected in a district account in a FY which have not been expended on June 30 of the sixth FY following the FY of collection, for which there is (2) as of the same date, an encumbrance (purchase order) on an impact fee eligible capital project in the district. According to the circuit court, this definition is the only logical one based on GAAP, the applicable provisions of the County Charter, and Annual Budget and Appropriation Ordinances. Under GAAP, an appropriation states the legal authority to spend or otherwise commit a government’s resources.

See Stephen Gauthier, Governmental Accounting Auditing and Financial Reporting at 305 (Government Finance Officers Ass’n 2001). 5 Meanwhile, § 715(a) of the County Charter provides that County officials and employees may not spend or commit funds in excess of appropriations, and § 17-11-201(2) defines an encumbrance as “a legal commitment for the expenditure of funds, chargeable against the applicable appropriation for the expenditure, that is documented by a contract or purchase order.” Thus, the court concluded that when determining the amount of “impact fees encumbered,” 6 the County ³³¹ was correct in comparing the amount of unexpended impact fees in the district account at the end of the relevant FY to the encumbrances entered in relation to capital projects in the district that have been determined by the PZO to be eligible in the district. Additional facts will be included as they become relevant to our discussion, below. Discussion Md. Code (1973, 2013 Repl. Vol), § 3-409(a) of the Courts & Judicial Proceedings Article provides that “a court may grant a declaratory judgment or decree in a civil case, if it will serve to terminate the uncertainty or controversy giving rise to the proceeding, and if ... [a]n actual controversy exists between contending parties.” (Emphasis added). “It follows that ‘declaratory judgment generally is a discretionary type of relief.’ ” Sprenger v. Pub.

Serv. Comm’n of Maryland, 400 Md. 1, 20 , 926 A.2d 238 (2007) (quoting Converge Servs. Grp. v. Curran, 383 Md. 462, 477 , 860 A.2d 871 (2004)). “Thus, we generally review a trial court’s decision to grant or deny declaratory judgment under an abuse of discretion standard.” Id.