Government Liability and Courts

MD AG Seeks Judicial Review of Wynne Whammy

Barbara Zektick County Budgets, County News, Government Liability and Courts, Summer Conference, Taxes and Revenues

The Office of the Attorney General has formally requested the Circuit Court of Anne Arundel County to review the Maryland Tax Court’s ruling which essentially raises the Wynne Case refund interest rate from three to 13 percent – a decision which would likely cost Maryland counties $30 to $40 million.

On May 23, the Maryland Tax Court ruled that providing taxpayers lower interest rate payments on Wynne refunds than on other refunds is unconstitutional, because it violates the Commerce Clause. From the opinion:

The Wynne refunds are the result of income tax provisions relating to income earned in other states by Maryland residents that only allow credits against the state income tax and not against county “piggyback” taxes. The U.S. Supreme Court ruled this was unconstitutional.

Following the exact same logic, granting interest at a lower rate must also be unconstitutional.

The Budget Reconciliation and Financing Act of 2014 altered the annual interest rate paid for income tax refunds resulting from Wynne, requiring the Comptroller’s Office to use an annual interest rate equal to the average prime rate of interest during fiscal 2015: three percent.

MACo President Jerry Walker, Council Vice Chairman, Anne Arundel County submitted a letter to Attorney General Brian Frosh on June 11, 2018 requesting that his office seek judicial review of the tax court’s opinion. From that letter:

On behalf of Maryland’s 24 county jurisdictions, the Maryland Association of Counties (MACo) respectfully requests that your office appeal the Maryland Tax Court’s May 23, 2018, decision …. Counties stand at the ready to assist on this front however deemed most helpful and appropriate.

…

We hope that you can represent the Comptroller, and practically, all of Maryland’s counties, by distinguishing the matter of how the refund interest rate is set from the fundamental Commerce Clause issues inherent in the Wynne case.

[Emphasis added.]

Four days later, the Attorney General’s Office filed its Petition for Judicial Review, and Counsel to the Comptroller Brian Oliner sent MACo this response.

From that letter:

We would like to thank the Counties for offering assistance.

To this end, county attorneys willing to lend their expertise on this matter should contact MACo Associate Director Barbara Zektick, Esquire at bzektick@mdcounties.org.

The case number for this matter is C-02-CV-18-001788. For the most recent information on this case, visit the Maryland Judiciary Case Search website and search this case number in the Anne Arundel County Circuit Court.

Prior Conduit Street coverage on Wynne is available here.

See Attorney General Brian Frosh moderate the panel, Like a Bridge Over Troubled Water: Know Your Water Law, at the MACo Summer Conference. The MACo Summer Conference will be held August 15-18, 2018 at the Rowland Powell Convention Center in Ocean City, Maryland. This year the conference’s theme is “Water, Water Everywhere.”

Learn more about MACo’s Summer Conference:

Environmental Groups Appeal Maryland’s Conowingo Dam Certification

Les Knapp Environment, Government Liability and Courts

A joint press release (2018-06-12) issued by Waterkeepers Chesapeake, the Lower Susquehanna Riverkeeper Association, and Earthjustice announced that several of the environmental groups have filed an administrative appeal challenging the Maryland Department of the Environment’s (MDE’s) recent decision to grant Exelon a Water Quality Certification for the relicensing of the Conowingo Dam with special conditions requiring Exelon to address the nutrient and sediment pollution generated by the dam and its reservoir. As previously reported on Conduit Street, Exelon has appealed the special conditions of the certification, arguing that the Dam does not actually create the water pollution that is being released by it. The environmental groups are arguing the opposite – that the special conditions do not go far enough to address water quality concerns.

From the press release:

Waterkeepers Chesapeake and the Lower Susquehanna Riverkeeper Association filed an administrative appeal on June 8, 2018, urging the Maryland Department of the Environment to reconsider its recent water quality certification for the Conowingo Dam, which is owned and operated by Exelon Corporation. Exelon has requested a new 50-year federal license to operate the dam, and, in order to receive that license, the State of Maryland must certify that the dam’s operations will not adversely impact water quality under the Clean Water Act.

“This is one of the most important decisions in the effort to clean up the Chesapeake Bay,” said Betsy Nicholas, executive director of Waterkeepers Chesapeake, a coalition of 19 independent waterkeeper organizations. “We shouldn’t be approving a 50-year license without a solid, accountable plan for removing sediment from behind the dam.”

The Conowingo Dam was completed in 1928 and, since that time, it has been trapping sediment and nutrient pollution from the Susquehanna River and its 27,000-square-mile drainage area. Sediment is one of the three key pollutants, along with nitrogen and phosphorus, that is regulated under the federal Chesapeake Bay cleanup plan, known as the TMDL.

Scientists have concluded that the reservoir behind the dam is now at capacity and cannot trap any more sediment. After large storms, powerful floodwaters can scoop out or “scour” the stored sediment behind the dam and send that downstream to the Chesapeake Bay in the form of pollution.

“Sediment runoff from agriculture and development has been stockpiling behind Conowingo dam for nearly 100 years,” said Ted Evgeniadis, Lower Susquehanna Riverkeeper. “The Susquehanna River is a public resource, and Exelon profits from operating a dam on it. Exelon therefore shares a responsibility to help prevent this sediment from polluting the Bay and we believe the State of Maryland must hold them accountable to do so.”

Waterkeepers Chesapeake, Lower Susquehanna Riverkeeper Association and Earthjustice submitted public comments during the relicensing process. The organizations say that the Maryland Department of the Environment has failed to address them.

The organizations also say that, for the certification to protect water quality, the State must understand the full potential of large flooding events that could cause dramatic harm to the Bay. The new license covers 50 years, but the State has yet to conduct a study or model how much sediment pollution would be scoured from behind the dam during a 50-year storm, or even a 25-year storm, which has an 83 percent chance of occurring during the license period. Scientists say large storms and heavy rain events are happening more frequently due to climate change, which means the risk of a catastrophic storm continues to increase.

“In just the last month, we’ve seen serious, damaging flooding throughout the region,” said Nicholas. “It’s irresponsible not to account for the increasingly likelihood that Conowingo Dam experiences a major flood during the next fifty years.”

The Maryland Department of the Environment issued its water quality certification for the Conowingo Dam on May 11, 2018. While the certification acknowledged the impact of the dam on water quality, including the threat posed by the accumulated sediment, it does not put specific measures in place to address the sediment.

“When Congress adopted the Clean Water Act, it purposefully gave states a very broad authority on federal permits,” said Jennifer Chavez, attorney for Earthjustice, which is serving as legal counsel for the appeal. “We’ve filed this request for reconsideration because we want to ensure that Maryland uses the best available science before exercising that critical authority.”

The Maryland Department of the Environment will review the appeal and either grant the request to reconsider and revise the certification or deny it. There is no deadline by which the Department must make its decision.

Useful Links

Prior Conduit Street article on Exelon Appealing MDE Conowingo Decision (2018-06-01)

Prior Conduit Street Coverage of Exelon and the Conowingo Dam

Waterkeepers Chesapeake Website

Earthjustice Website

Cecil & Queen Anne’s Counties Jointly Appeal Phase II MS4 Permit

Les Knapp Environment, Government Liability and Courts, Summer Conference

A MyEasternShoreMd.com article (2018-06-07) reported that Queen Anne’s County and Cecil County have jointly appealed their recently issued National Pollution Discharge Elimination System (NPDES) Phase II Municipal Separate Storm Sewer System (MS4) permit. Phase II MS4 permits can apply to smaller jurisdictions with some urbanized population and are mandated under the federal Clean Water Act. The permit sets stormwater mitigation and retrofit goals that a local government must meet by the end of the permit’s term.

The Maryland Department of the Environment (MDE) has delegated authority from the United States Environmental Protection Agency to draft, issue, and enforce MS4 permits in Maryland. MDE issued the most recent Phase II MS4 permit on April 27, 2018. The permit will take effect October 31 of 2018 and has a 5-year term. This permit will apply to Calvert, Cecil, Queen Anne’s, St. Mary’s, Washington, and Wicomico Counties, and numerous municipalities. Ten of Maryland’s counties are subject to a broader Phase I permit that is specifically tailored for each jurisdiction.

The article noted that while Cecil County is already a Phase II permit jurisdiction, this will be the first time Queen Anne’s County has received the designation. Both counties are appealing based on budgetary concerns regarding compliance with a 20% impervious surface area retrofit goal, which is estimated to cost Queen Anne’s County approximately $10 million through 2025. From the article:

Cecil County’s existing permit requirements have been manageable, but the added restoration requirement would add millions more to Cecil’s annual budget as well.

It is unfortunate that counties must file an appeal seeking to resolve matters contained in the permit, [Queen Anne’s County] commissioners said. The county is working to improve the environment in many ways and has devoted considerable resources toward improving the natural environment for the benefit of the Chesapeake Bay, its residents, businesses and guests….The county strongly believes, however, that the extraordinary restoration and retrofit requirements prescribed by the permit are not financially or operationally practicable to fulfill, commissioners said.

Useful Links

MDE Phase II Permit Web Page

New Phase II Permit (issued by MDE on April 27, 2018)

Prior Conduit Street MS4 Permit Coverage

Learn more about both Phase I and Phase II MS4 permit issues at the 2018 MACo Summer Conference from August 15 to 18 at the Roland E. Powell Convention Center in Ocean City, MD.

Learn more about MACo’s Summer Conference:

 

 

Local Media File Amicus Brief Challenging Baltimore’s Police Misconduct Non-Disclosure Agreements

Les Knapp Government Liability and Courts, Public Information and Ethics

A Baltimore Brew article (2018-06-01) reported that the Reporters Committee for Freedom of the Press and 19 news organizations, including the Washington Post, Baltimore Sun, and the Maryland-Delaware-District of Columbia Press Association, have filed an amicus brief supporting a case challenging the validity of Baltimore City’s use of non-disclosure agreements when settling police misconduct cases. The case could set a precedent for any local government that utilizes a non-disclosure agreement as part of a settlement and could potentially apply to other situations besides police misconduct.

The original case was brought by Baltimore Brew and Ashely Amaris Overbey. Overbey signed a non-disclosure agreement after settling with the City over alleged police misconduct and was later found to have violated that agreement after responding to social media comments about her experience. The violation cost Overbey half of her prior settlement. The U.S District Court upheld the agreement and dismissed Overbey’s claim. The case is on appeal in the U.S. Court of Appeals for the Fourth Circuit.

From the article:

The media brief argues that news reporting on police misconduct settlement claims is more accurate and fair when reporters can speak to complainants and learn the details of their agreements.

“Contrary to the district court’s assumption, it is not enough for news organizations to simply rely on civil complaints filed by victims in order to report these stories,” it argues.

“Without human sources to interpret and fill the gaps often left in documents, reporters cannot provide the public with the information it needs to decide how it wants its government to act.”

 

A Tax Payment By Any Other Name…

Barbara Zektick County News, Government Liability and Courts, Taxes and Revenues

The IRS was never going to be fooled by these workarounds.

Governing quotes Jared Walczak, a senior analyst at the Tax Foundation, in a story discussing the Internal Revenue Service (IRS)’s plans to crack down on states creating new laws protecting their taxpayers from the adverse impacts of federal tax reform.

While the federal reform will likely result in lower federal income tax liabilities for most taxpayers, it also has the unintended consequence of raising taxpayers’ liabilities for state and local income taxes in many states – particularly states like Maryland, with significant state and local income tax rates.

While last session, Maryland lawmakers made some changes to address this reality, the General Assembly generally took a more “wait and see” approach on more substantive or aggressive changes to our state’s tax code. Now that news begins to materialize about the IRS’s efforts to pass regulations addressing the Federal Tax Cuts and Jobs Act, it seems that was, in fact, a prudent course of action.

According to Governing, the IRS is particularly concerned about approaches which allow taxpayers to avoid the new $10,000 cap on state and local tax deductions by paying overages into a state charitable trust:

Last week, the IRS announced that it would propose regulations that address attempts by states to help their residents avoid the new federal cap on state and local tax deductions. So far, California, New Jersey and New York are nearing passage of laws that would allow residents who owe more than $10,000 in state and local taxes to pay the remainder into a state charitable trust. Because charitable contributions are still tax-deductible under federal law, the state trust contribution offers residents a workaround.

This idea of allowing taxpayers to deduct all of their state and local taxes from federal income tax liability by “donating” overages to a state government “charity” got batted around a tad last session in Maryland.

Governing cites Walczak, who points out that legal doctrine generally authorizes the IRS to crack down on efforts which attempt to avoid federal tax liability by simply calling state and local tax payments “charitable deductions,” instead. To paraphrase, a tax payment by any other name is still a tax payment.

Here’s the issue: new regulations addressing charitable deductions to government organizations could place existing programs in Maryland, which have passed legal muster for years, in jeopardy. The article points to the Maryland Environmental Trust as an example. This could well filter down to the county level. The Community Foundation of Howard County, currently soliciting tax deductible donations to assist victims of the Ellicott City flood, comes to mind. If new regulations place these tax deductions at risk, even though they clearly fit under the intent of the existing charitable deduction… well, that would be a shame.

Court Strikes Wynne Interest Rate, Costing Counties $30 Million

Barbara Zektick County Budgets, County News, Government Liability and Courts, Taxes and Revenues

Last week, in the latest twist in the Wynne saga, the Maryland Tax Court ruled that providing taxpayers lower interest rate payments on Wynne refunds than on other refunds is unconstitutional, because it violates the Commerce Clause.

The new interest rate, according to the Comptroller’s Office and the court, would be 13 percent.

From the opinion:

The Wynne refunds are the result of income tax provisions relating to income earned in other states by Maryland residents that only allow credits against the state income tax and not against county “piggyback” taxes. The U.S. Supreme Court ruled this was unconstitutional.

Following the exact same logic, granting interest at a lower rate must also be unconstitutional.

The Budget Reconciliation and Financing Act of 2014 altered the annual interest rate paid for income tax refunds resulting from Wynne, requiring the Comptroller’s Office to use an annual interest rate equal to the average prime rate of interest during fiscal 2015: three percent.

The court opinion is estimated to cost counties approximately $30 million, beginning in February 2021.

Last session, MACo succeeded in advocating for delaying counties’ required repayments for Wynne refunds to the Local Income Tax Reserve Account by two years. MACo also successfully fought against a bill which would have raised the interest rate on Wynne refunds to 13 percent, just as the Tax Court just did.

Neither the Attorney General’s Office nor the Comptroller’s Office have indicated yet whether they intend to file an appeal.

Exelon Appeals Conowingo Order: Imposed Clean-up “Unfair Burden”

Barbara Zektick Environment, Government Liability and Courts, Summer Conference

Exelon is appealing the Maryland Department of the Environment (MDE)’s decision from last April charging the energy monolith with significantly reducing nutrient and sediment pollution coming from the Conowingo Dam – an order which could cost Exelon up to $172 million annually.

The dam has posed a challenge for restoration efforts under the Chesapeake Bay Total Maximum Daily Load (TMDL) after research revealed that the dam’s reservoir has unexpectedly reached its capacity to trap sediment and nutrients from moving further downstream of the Susquehanna River and eventually into the Chesapeake Bay. MDE’s decision also requires Exelon to improve conditions for aquatic life and fish migration and improve debris management.

Exelon filed the appeals on May 25 in the District of Columbia Federal District Court, the Maryland Circuit Court in Baltimore, and with MDE. The company challenges Maryland’s water quality certification issued for Conowingo Dam pursuant to the Federal Clean Water Act on April 27, 2018.

From the Pennsylvania law firm Stock and Leader’s website:

The outcome of this litigation could have a significant impact on funding for nutrient reduction efforts throughout the Chesapeake Bay watershed, particularly in Pennsylvania.

Among other things, Maryland’s certification requires that Exelon develop a sediment and nutrient management plan to eliminate six million pounds of nitrogen and 260,000 pounds of phosphorus that would ultimately otherwise pass through the dam into the Chesapeake Bay. Maryland would allow Exelon several options to meet the reduction requirement, such as dredging the sediments trapped behind the dam. The likely way Exelon would achieve this goal, however, would be through the payment of in-lieu annual fees of $17 per pound of nitrogen and $270 per pound of phosphorus, for a total annual expenditure of approximately $172 million.

Exelon argues that the State’s order imposes an “unfair burden” that would cost “orders of magnitude” more than the dam is worth, according to the Bay Journal. From that coverage:

Exelon said it went to court at the same time it asked the MDE to reconsider its decision because of the “seriousness of the issues at hand.”

“The dam itself does not produce any pollution,” Exelon said in a statement issued Friday. “Rather, the science clearly shows that the pollutants that travel down the Susquehanna River, from New York and Pennsylvania, are the source of the nutrients and sediments that flow into the Bay.”

Learn more about the Conowingo Dam’s role in the third and final phase of the Chesapeake Bay TMDL, and how it will affect both Maryland and its counties, at the Summer Conference session, Charting the Next Course for the Bay TMDL.

The MACo Summer Conference will be held August 15-18, 2018 at the Rowland Powell Convention Center in Ocean City, Maryland. This year the conference’s theme is “Water, Water Everywhere.”

Learn more about MACo’s Summer Conference:

 

Ellicott City: Howard’s to Handle

Barbara Zektick County News, Government Liability and Courts, Intergovernmental Relations, NACo and Federal Issues, Public Safety and Corrections, Summer Conference

After suffering its second episode of inundating, historic, “1,000-year” flooding within two years on Sunday, Howard County officials are bracing, once again, for more storms on Friday, reports the Baltimore Sun.

In Ellicott City, Howard County officials have removed 100 truckloads of debris from Main Street in recent days, hoping to clear a path for any downpours in coming days. ….

Storms with heavy rain could hit Maryland on Thursday, Friday and Saturday, causing more flooding on ground that is already heavily saturated. A flash flood watch is in effect Thursday afternoon and evening, with chances for downpours of as much as 2 inches to 4 inches of rain.

According to the Ellicott City Partnership’s website:

Founded in 1772, Old Ellicott City is a unique town full of surprises.

While that may be true, it deserves noting that Ellicott City is not, actually, an incorporated municipality. In fact, Howard does not have any incorporated municipalities at all. For this reason, Howard County bears all local government responsibility for disaster recovery and repair to the “town” – just like it did two years ago, and just like it does every day. From NACo’s coverage:

The county assisted about 300 residents May 27 and about 30 of those were water rescues, County Fire Chief John Butler said. The county’s 911 center fielded more than 1,100 phone calls during a six-hour window. …

[County Executive Allan] Kittleman’s news conferences were aired live on the county’s Facebook page and archived there; the press conference May 28 saw 12,000 views and received nearly 300 comments. The county is also getting the word out via its Twitter channel.

The county also set up a special page on its website with continuous updates with information on how to volunteer, a hotline phone number and where people could find cars swept away by the flood currents. Information was also available on storm debris removal, counseling for residents and a disaster assistance center that was opened. …

For those wanting to make donations, the county is sending people to the Community Foundation of Howard County website.

Video Posted by Howard County Government’s Official Youtube Channel.

At this year’s annual MACo Summer Conference, attend Batten Down the Hatches! Weathering a Water Crisis to learn how Maryland counties are collaborating with industry professionals to ensure that comprehensive crisis management plans are in place to address floods and other water-related emergencies efficiently.

The MACo Summer Conference will be held August 15-18, 2018 at the Rowland Powell Convention Center in Ocean City, Maryland. This year the conference’s theme is “Water, Water Everywhere.”

Learn more about MACo’s Summer Conference:

 

Know Your (Riparian) Rights! #MACoCon

Barbara Zektick Environment, Government Liability and Courts, Planning and Zoning, Summer Conference

Do you know your riparian rights?

Do you know what those even are?

Maryland has 3,190 miles of shoreline – and, with those miles of shoreline, come 3,190 miles of riparian rights. Join some of Maryland’s top attorneys at MACo’s Summer Conference, “Water, Water Everywhere,” to learn about how federal, state and local law all interplay to regulate shoreline improvements – and what counties can do to protect their most important water assets for everyone.

Like a Bridge Over Troubled Water: Know Your Water Law

Description: Maryland counties are rich with water, both in terms of waterfront access building-731207_1920and in sustainable water and wastewater infrastructure. Counties benefit from this — but along with these assets come great responsibilities and risks. Conflicts that arise over responsibilities for water-related assets cannot often be shrugged off as “water under the bridge,” but require proactive planning and protection. In this session, learn how counties depend upon the law to protect water-related assets, keep their water clean, and interplay with various federal and state laws. As an added bonus, attendees will finally find out what “riparian rights” actually are.

Speakers:

  • John Mattingly, Esquire, County Attorney’s Office for Calvert County
  • Lisa Ochsenhirt, Esquire, Attorney, AquaLaw PLC

Moderator: The Honorable Brian Frosh, Maryland Attorney General

Date/Time: Thursday, August 16, 2018; 3:30 pm – 4:30 pm

The MACo Summer Conference will be held August 15-18, 2018 at the Rowland Powell Convention Center in Ocean City, Maryland. This year the conference’s theme is “Water, Water Everywhere.”

Learn more about MACo’s Summer Conference:

Maryland Seeks Outside Counsel to Assist in Opioid Investigation

Les Knapp Government Liability and Courts, Health and Human Services

A Daily Record article (2018-05-15) reported that the Maryland Office of the Attorney General (OAG) has released a request for proposals (RFP) for an outside law firm to assist as special litigation counsel in the Office’s investigation of opioid manufacturers and distributors.  Maryland, like many other states, is facing a significant public health crisis caused by opioid abuse. The article stated that Maryland Governor Larry Hogan has authorized both the RFP and the initiation of litigation if warranted.

Anne Arundel, Baltimore, Harford, Montgomery, and Prince George’s Counties and four Maryland municipalities have already initiated their own litigation or are participating in multi-state litigation against opioid manufacturers and distributors through the use of outside counsel.

From the article:

Attorney General Brian E. Frosh said in an interview Tuesday he expects a robust response to the request, likely from law firms already representing municipalities and states in lawsuits against the drug companies. …

While Frosh has said he has not ruled out the possibility of filing a traditional lawsuit, the current strategy will involve filing individual administrative proceedings against the companies alleging violations of the Maryland Consumer Protection Act if it is determined enough evidence exists.

The RFP document (2018-05-11) includes the following purpose paragraph:

The purpose of this Request for Proposals (“RFP”) is to obtain proposals to serve as Special Litigation Counsel to the Division in its investigations and, if necessary, in enforcement proceedings, including administrative hearings, against certain manufacturers, distributors, and other entities and individuals involved in the marketing, sale, and distribution of opioid painkillers and related products. Special Litigation Counsel will also assist the Division in subpoena enforcement litigation.

The article noted that written proposals are due June 18.

Useful Links

OAG Request for Proposals for Special Counsel on Opioid Issues