Laurel Racing Association, L.P. v. Anne Arundel County

Nazarian, J. Back in the last decade, Laurel Racing Association (“Laurel Racing”) began planning to redevelop the Laurel Park horse racing complex. As part of that process, Laurel Racing reserved from Anne Arundel County (the “County”) the additional water and sewer capacity its new facilities would require. After reviewing the proposed plans, the County’s Office of Planning and Zoning (“OPZ”) approved, in 2008, the allocation Laurel Racing requested, and Laurel Racing never appealed that decision. Reserving water and sewer capacity isn’t free, and when a substantial fee came due in 2013, Laurel Racing challenged the Department of Public Works’s (“DPW”) method of calculating the capacity the project needed, arguing that the long-ago-approved figure had overstated its incremental water and sewer needs by failing to credit the racetrack’s current usage.

The parties exchanged data and studies, and DPW sent Laurel Racing a letter on February 25, 2014 offering to reduce the allocation. The question for us is whether this letter was an appealable agency action. It wasn’t. I. BACKGROUND In 2006, Laurel Racing submitted to OPZ a Development Application that proposed a wholesale renovation of the racing complex.

The application included a sketch plan that included demolition of the existing grandstand and renovations to the site that would reduce the seating capacity for horse racing (which had become less popular) in favor of commercial and retail space and space for the long-awaited arrival of “video lottery terminals.” The sketch plan also included a required water and sewer capacity calculation worksheet that concluded that the project would require 1,501 equivalent dwelling units ³¹⁴ (“EDU”) of new water and sewer capacity. The EDU worksheet outlined future uses only because “[a]t the time of submission, the project engineer was unaware of any County policy or procedure where a developer could seek to offset proposed EDU usage with existing usage.” The Anne Arundel County Code (the “AACC” or the “Code”) provides that “[f]or a property that is required to pass the test for adequate public water supply facilities or adequate public sewerage facilities, [DPW] shall make an allocation on the date of approval by [OPZ] for adequacy of public water supply facilities as provided in § 17-5-202 of this Code.” AACC § 13-5-402(b) (2005). An allocation, a “reservation, for use by a particular property, of available capacity,” AACC § 13-5-401, is required if, “due to development activity on the property, the property is required under Article 17 of th[e Code] to pass the test for adequate public water supply facilities or adequate public sewerage facilities; or the property is otherwise connecting to the County water or wastewater system,” AACC § 13-5-402(a). DPW does not analyze on its own whether a subdivision proposal adds to or displaces existing water and sewer facilities—it relies on the developer’s engineer to determine the project’s impact.

In two letters dated November 21, 2008, OPZ approved Laurel Racing’s sketch plan and allocated 1,501 EDUs of water and sewer for the project. Laurel Racing did not appeal this decision. Water and sewer capacity are finite resources, and the Code imposes charges on developers to reserve EDUs for future development. “For property receiving an allocation in conjunction with approval by [OPZ] for adequacy of public water supply facilities ..., the owner of the property shall pay, for each equivalent dwelling unit: (1) an allocation reservation charge ... as computed by [DPW] ...; and (2) [a] capital facility connection charge .... ” AACC § 13-5-403(a). Allocation reservation charges were due immediately, and Laurel Racing paid them.

The capital facility connection charge (“CFCC”) and deferral fees did not come due until the fifth anniversary of the allocation, and on November 1, 2013, DPW sent Laurel Racing Allocation Billing Statements due on No ³¹⁵ vember 30—one for water EDUs totaling $19,974,600 and one for sewer EDUs totaling $4,328,640. Sometime in 2013, though, Laurel Racing had learned that the County had, as the County’s Board of Appeals later put it in a Memorandum Opinion we discuss below, a “policy or procedure in effect at the time of the 2006 submission to provide EDU credits for existing facilities. That is, if a use had existing EDUs, the County requires that a developer reserve only the number of additional EDUs that would be required to serve the redevelopment.” (Emphasis in original.) The then-DPW Director explained to the Board that these credits were meant to ensure “that an owner doesn’t pay the [facility connection charge] for EDUs that they’ve paid to the County in the past,” and that DPW was responsible for calculating the new EDUs required. Accordingly, Laurel Racing “contacted the County about the concern that [it] w[as] being—flows were being double counted, and they were not being adequately considered for what existing flows [it] already had in the system, what existing capacity [it] had in the system.” On December 12, 2013, Laurel Racing’s representatives met with DPW to discuss the possible double-counting.

Rather than requiring a new EDU worksheet, the County asked “if [Laurel Racing’s] consultant could come up with a way to analytically compare the existing use, dis-aggregate ... what’s in the grandstand [a mix of retail and commercial space], to an existing use number so that [DPW could] compare it to what’s proposed.” DPW followed up on the meeting in a letter dated December 23, 2013: As discussed during the meeting, [DPW] has agreed to give your engineers through January 31, 2014, to provide information regarding existing uses that may have been part of the EDU calculation previously provided. [DPW] will thereafter review the information and make a revised EDU calculation, if appropriate. If the number of EDUs is revised, the original allocation date will still apply and all associated charges will be due in accordance [with] the County Code based on the original ³¹⁶ allocation date of November 21, 2008. Therefore, the [CFCCs] and the capital facility deferral fee for the adjusted number of EDUs will be due no later than April 30, 2014, or the allocation will lapse.... The County will stay the late interest on the outstanding [CFCCs] until February 28, 2014.

This time was determined to be roughly 30 days for the new information to be provided to DPW and 30 days for review and final agreement. DPW explained that “[a]s th[e double counting issue] came to [its] attention after 2008, ... [DPW offered credits because it] was trying to reach a reasonable settlement of what the existing capacity in the system associated with Laurel [Racing] was.” On January 29, 2014, Laurel Racing’s engineer sent a letter to DPW detailing its calculations: “the total existing flow equals 306,100 gallons, or 1,224 EDU’s” and the total proposed flow in accordance with this calculation is 261,030 gallons per day or 1,044 EDU’s.” As such, the engineer concluded that Laurel Racing’s water flow would not increase as a result of the redevelopment: [W]e suggest that the Laurel [Racing] proposed plan, in fact, will not generate an increase in flow, and therefore not require additional EDU’s to be allocated and thereafter purchased. Had the existing uses been accounted for in the original computation from 2007, we believe this would have come to light, thereby avoiding the need to purchase additional capacity, paying the allocation reservation charges, and saving the owner significant expense. In the engineer’s view, the numbers “basically show[ed] that there already is more capacity vested than what [Laurel Racing] need[s].” DPW and OPZ staff reviewed the analysis and found “a lot of inconsistencies with how the comparison was done.” According to DPW staff, Laurel Racing’s EDU number resulted “[f|rom a new proposed scheme development configuration that [it] couldn’t corroborate.” So DPW responded, in a letter ³¹⁷ from its Director dated February 25, 2014, that the EDU calculations in Laurel Racing’s original application and the 2008 allocation of 1,501 EDUs did not account for Laurel Racing’s current water and sewer usage.

The Director acknowledged receipt of Laurel Racing’s engineer’s January 29, 2014 letter, but expressed concern with the calculation of current usage, and concluded that the redevelopment would increase capacity needs by 470 EDUs for water and 954 EDUs for sewer. 1 The letter noted that although Laurel Racing may have modified the project, “the recalculated EDUs discussed in this letter can only be based on the proposal that has been approved by [OPZ]. If the project is to be revised again, the proposal would be considered by [OPZ] during the course of the normal review process.” The Director concluded that OPZ would issue a revised allocation letter and that the revised capital facility connection and deferral fees would need to be paid by no later than May 5, 2014 to prevent the allocation from lapsing. Laurel Racing received a revised Allocation Billing Statement on March 5, 2014 that reduced the total fees to $12,674,800. The new statement said that interest would be added to payments received after April 20, 2014, and that if the bill remained unpaid after May 5, 2014, the new allocation of 954 units of sewer and 470 units of water would lapse.

Around this same time, Laurel Racing filed a Notice of Appeal with the Anne Arundel County Board of Appeals (the “Board”) challenging DPW’s calculation of the EDUs required for the project and the resulting charges and fees. ³¹⁸ Then, in response to OPZ’s concern that its engineers had submitted the proposed EDU worksheets with its sketch plan “and did not consider any flows/capacity of the existing development at the site,” Laurel Racing sent a letter to OPZ on April 17, 2014 that contained new EDU computations by different engineers. The new calculations included both existing and proposed water and sewer usage, and determined that “the total existing flow equated to .,. 1,225 EDU’s” and “the total proposed flow equates to ... 1,044 EDU’s.” (Emphasis omitted.) Laurel Racing’s engineers also asked OPZ and DPW to “re-evaluate the EDU worksheets for this project and issue a new revised corrected allocation letter” because, they argued, “[biased on [their] analysis ... the proposed Laurel Park project will not generate an increase in flow, and therefore should not have required additional EDU’s to be allocated and subsequently purchased/reserved. Had the existing uses and flows been accounted for in the original Sketch Plan and Allocation approvals in 2007, the track owners would have avoided the need to purchase additional capacity and pay for the reservation charges, saving the track a considerable unnecessary expense.” The County responded by letter on May 2, The letter acknowledged that OPZ “ha[d] reviewed the revised EDU worksheet, but a revised allocation based on that c[ould] not be issued without a formal Pinal Plan being resubmitted.” It did, however, review archived records of Laurel Racing’s actual usage back to 2001 that showed peak daily usage of 1,162 EDUs for water and 674 EDUs for sewer. As such, the County “offer[ed] to revise the allocation set forth in the February 26, 2014 letter to 3S9 EDU’s for water (1501 minus 1162) and 827 EDU’s for sewer (1501 minus 674) based on the archived billing records.” The letter cautioned as well that “[t]his letter does not constitute a final, appealable decision; it is an offer to revise the EDU calculations.” The County then moved in July 2014 to dismiss Laurel Racing’s appeal on the grounds that the appeal of the February 25 letter was untimely and that the Board lacked jurisdiction.

After “meet[ing] in closed session to consult with counsel ³¹⁹ to obtain legal advice,” the Board denied the motion, concluding that the February 25 letter constituted a modification of a prior approval. In August 2014, the County submitted a Motion to Reconsider its Motion to Dismiss and the Board denied that motion too. After seven evenings of hearings, the Board issued its decision in a Memorandum of Opinion on December 15, 2014. The Board found that the February 25 “letter represented] an approval (albeit not in the full amount) of [Laurel RacingJ’s request for EDU credits and contained] an ‘operative event’ from which a proper appeal may be noted to this Board,” (citing United Parcel Serv., Inc. v. People’s Counsel for Balt.

Cty., Md., 336 Md. 569, 583-84 , 650 A.2d 226 (1994)), and thus that the appeal was timely. On the merits, the Board granted Laurel Racing (1) a credit for 1,501 EDUs improperly reserved, (2) a credit of $2,592,839.15 for improperly assessed Allocation Reservation Charges to be applied towards future usage and facility charges at the Laurel Park location, (3) a waiver of all pending Allocation Reservation Charges, (4) a credit for existing capacity of 1,225 EDUs, and (5) a determination that the Laurel Park redevelopment will require only 1,044 EDUs. The County sought judicial review in the circuit court and Laurel Racing cross-appealed. The parties submitted memo-randa and the court held a hearing on May 11, 2015.

In an Order and Memorandum Opinion entered on January 8, 2016, the circuit court reversed and remanded to the Board with directions to grant the County’s Motion to Dismiss. The circuit court addressed sua sponte the need for a final administrative order before a party may resort to judicial review, and determined that the February 25 letter was not a final administrative decision: [The February 25 letter wa]s at most a statement of intention that the County will modify and recalculate the EDUs, but only after pending actions such as, a “Final Plan”