County Urges Fiscal Responsibility with DRRA Surplus

Both sides of the debate over development have put DRRA (Developer Rights and Responsibility Agreements) funding front and center as the furor over school allocations continues to emerge as the main issue in Charles County politics. DRRAs are the Charles County Governments form of Impact Fees.
As of June 30, 2012, the DRRA reserve funds had a $9.1 million surplus.
DRRAs, which operate like impact fees, are agreements made by the county and the developers of housing projects. The developers pay the county for school allocations and infrastructure costs. The money is then put in the DRRA reserve fund where it’s used for infrastructure spending and construction of new schools.
“The county has historically used the funds as a type of working capital for future school projects or to pay for the principal and interest cost associated with school construction bonds when school excise tax revenue is insufficient to pay for the full debt service,” Deborah Hudson, director of the Department of Fiscal and Administrative Services, said.  “In the State of Maryland, school construction is shared between the state and the local government. Often, due to udgetary constraints, the state government fails to fund the state's share of school construction in either the appropriate amount or in the time period that the funds are needed, usually the latter of the two. The county has experienced both occasions in the past and expects to experience the same conditions in the future. When state funding is delayed and eventually reimbursed by the state, the reimbursed funds are then restored to the DRRA working capital reserve account.
“It has been our practice to be fiscally conservative with the DRRA funds due to the uncertainty of funding at the state level. Specifically, the funds are reserved and then applied when needed so that a new school or school expansion can be completed in the time period it is needed, regardless of timely state assistance. The funds are exclusively used in the CIP for school construction, with one exception when small appropriations of the funds were used for the Board of Education operating budget for a one year period.”
When it comes to using the costs to build a new school, and the costs of a new school, Hudson said there were complications that come with construction of a new school.
“Because the state sets the cost share ratio based on a wealth formula and on a square foot to construct, those additional factors can adjust a county's share for school construction,” she said. “Both variables are out of the county's control. The county has recently been notified by the state that the state share of school construction will decrease over the next few years as a result of the wealth formula. All things equal, this will increase the county's share for school construction; yet another reason to be fiscally responsible with the DRRA money.”

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