By Adam Pagnucco.
County Executive Marc Elrich’s recommended FY27 operating budget contains a property tax increase and an income tax increase, both of which are receiving public attention. But it also contains a recommendation for two “special taxing districts” which could ultimately charge more than either of the tax hikes listed above. What are these districts? And why does Elrich want them?
Special taxing districts are a type of development district specified in Chapter 14 of the county code. Here is how the budget defines them.
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Development Districts. Legislation enacted in 1994 established a procedure by which the Council may create a development district. The creation of such a special taxing district allows the County to issue low-interest, tax-exempt bonds that are used to finance the infrastructure improvements needed to allow the development to proceed. Taxes or other assessments are levied on property within the district, the revenues from which are used to pay the debt service on the bonds. Development is, therefore, allowed to proceed, and improvements are built in a timely manner. Only the additional special tax revenues from the development district are pledged to repayment of the bonds. The County’s general tax revenues are not pledged. The construction of improvements funded with development district bonds is required by law to follow the County’s usual process for constructing capital improvements and, thus, must be included in the CIP.
The County Council may also create a development district pursuant to the same legislation whose real property tax increment can be used to repay bonds that are issued to finance the infrastructure improvements needed to allow the development to proceed. This tax increment is not an additional tax, but the incremental real property tax derived from the growth in the assessed value in the district that occurs because of the new development. Only the tax increment from the district is pledged to repayment of the bonds. The County’s general tax revenues are not pledged.
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And so districts of this kind are used to collect property taxes, use them to back up revenue bonds and then use those bond proceeds to build infrastructure, often transportation projects.
Elrich offers more comment on why he favors creation of more of these districts later in the budget.
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Special Taxing Districts
The County has two active special taxing districts: West Germantown and White Flint. West Germantown was created in accordance with Chapter 14 of the Montgomery County Code, the Montgomery County Development District Act enacted in 1994. The White Flint Taxing District was created in accordance with Chapter 68C of the Montgomery County Code, which was enacted in 2010. The creation of these districts allows the County to provide financing, refinancing, or reimbursement for the cost of infrastructure improvements necessary for the development of land in areas of the County with high priority for new development or redevelopment.
The budget recognizes the creation of a Strategic Special Taxing District that is within half mile of each side of the centerline of all routes designated as Bus Rapid Transit in the 2025 Master Plan of Highways and Transitways, within half mile of each side of the centerline of the final design alignment of the Maryland 355 Central Bus Rapid Transit, within the boundaries of the municipality of Kensington, and within the Clarksburg Gateway Sector plan. Revenue collection for this district is expected to begin in FY28 and debt service on bonds issued to fund infrastructure in the district is programmed in FY29.
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The White Flint development district charges a tax rate of 11.04 cents per hundred dollars of assessed value for properties inside its boundaries. Since it was established in 2010, it has provided $66 million of revenue for capital projects in White Flint and is projected to finance another $110 million after FY32. Elrich has not sent over a recommended tax rate for his new proposed districts, but if property owners pay the White Flint rate on top of their current total county tax rate, it would be a 10.6% increase in property taxes.
Recently, Elrich sent a memo to the council describing his new districts. There are two of them. One is county-wide. The other applies to properties in these areas:
(1) within 0.5 miles on both sides of all routes mapped on the Bus Rapid Transit dataset recorded on Montgomery County GIS Open Data (https://opendata-mcgov-gis.hub.arcgis.com/) as of March 1, 2026;
(2) within the Town of Kensington;
(3) within the boundaries of the Clarksburg Gateway Sector Plan; and
(4) south of the Clarksburg Gateway Sector Plan area along Observation Drive that are east of I-270, north of Father Hurley Boulevard, and west of the North Germantown Greenway Stream Valley Park.
There is a LONG list of exempted properties from both districts. I have not identified all of them but they appear to be residential properties. If residential properties are systematically excluded from the districts, this would fulfill Elrich’s longstanding ambition to levy extra taxes on commercial property.
Elrich’s transmittal memo to the council is reprinted below.
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MEMORANDUM
March 13, 2026
TO: Natali Fani-González, President
Montgomery County Council
FROM: Marc Elrich, County Executive
SUBJECT: Bill XX-26 – Countywide GROWTH Special Taxing District; and Bill XX-26 – GROWTH Corridors Special Taxing District
As promised in the transmittal of my recommended capital budget in January, I am transmitting a legislative package to enable two new Transportation Projects Special Taxing Districts. The Countywide Growing Opportunities, Workforce, Transportation, and Housing (GROWTH) District, paired with the GROWTH Corridors District, provides funding for critical infrastructure needs.
The FY27-32 Capital Improvements Program (CIP) demonstrates that our capital needs exceed available revenue, especially when it comes to the infrastructure necessary to support our current families and continue attracting residents and businesses to the County. I focused most of our CIP fiscal capacity on maintenance and critical upgrades for schools, transportation, and buildings. However, the County needs a new funding source to create new transportation capacity, which we must do by transforming our roadways to enable high-quality, high-capacity transit in the form of Bus Rapid Transit (BRT). We must also make targeted investments in roadways and Metro stations to support economic growth without adding congestion.
Together, the two GROWTH districts provide a two-tiered structure to raise funds. The Countywide district recognizes that all County property owners benefit from transportation investments, while the corridor-focused district provides a clear nexus with the properties that are most proximate to and therefore benefit most directly from new transportation investments. The districts will allow us to accelerate projects that positively impact economic development, including moving three BRT projects into construction. BRT has the ability to transform the way we use transit in the County, but we need a large-scale investment to allow residents to benefit from a network of rapid transit corridors. The special taxing districts also fund the construction of Observation Drive and Summit Avenue, which enables new commercial and residential development in Clarksburg and Kensington while increasing mobility. Finally, revenues from the new GROWTH districts will make transformative improvements at the Forest Glen Metrorail station.
Enclosed, please find both pieces of legislation and associated fiscal impact statements.
Enclosures: Bill XX-26 – Countywide GROWTH Special Taxing District
Bill XX-26 – GROWTH Corridors Special Taxing District (with appendix)
Fiscal Impact Statements
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Elrich’s two proposed bills creating the tax districts can be downloaded below.
Council President Natali Fani-Gonzalez is not a fan of these tax districts, and since they are not directly relevant to the FY27 operating budget, they probably won’t be considered soon. However, if Elrich is elected to a county council at-large seat, the idea will not die.
Are these districts justified? I will offer my take soon.