Infrastructure Cost-Sharing Agreements: What Maryland Builders Should Negotiate with Municipalities

The pro forma pencils. Then the county asks for a signalized intersection, a sewer upsize two parcels past the property line, and a dedication strip along the frontage — and the deal that worked at concept plan stops working.

Infrastructure cost-sharing agreements decide who pays for the roads, sewers, and stormwater systems a development triggers. Maryland gives local jurisdictions express authority to require off-site improvements and dedications, and gives builders one instrument capable of fixing those cost-sharing obligations and freezing the rules that generate them. Nearly every term is negotiable before a condition is imposed, and almost none of it afterward.

What Legal Authority Lets a Maryland Municipality Demand Infrastructure Cost Sharing?

Maryland Land Use Article § 7-101 authorizes local jurisdictions to enact laws requiring the planning, staging, or provision of adequate public facilities and requiring off-site improvements or the dedication of land for public facilities essential for a development. Section 7-103 confirms this authority supplements local planning powers.

Paragraph (2) of Land Use § 7-101 is the sentence most builders never read, and every county planner knows. It is the express state grant permitting a jurisdiction to require improvements beyond the property line, and it underlies every infrastructure cost-sharing demand in Maryland. Section 7-103 makes the grant non-exclusive, so a home-rule county keeps independent authority alongside it.

One correction is worth making, because it circulates as folklore. Maryland does not cap adequate public facilities moratoria inside Priority Funding Areas. Section 7-104 requires only biennial reporting of such restrictions to the Maryland Department of Planning.

Cost-sharing contributions a Maryland jurisdiction can lawfully seek include:

• Off-site road, intersection and signal improvements tied to the development’s traffic impacts.
• Water and sewer main extensions, installed at the builder’s expense and conveyed to the utility.
• Impact fees or development excise taxes, where the county holds specific enabling authority.

How Does a Development Rights and Responsibilities Agreement Lock In the Deal?

A Development Rights and Responsibilities Agreement under Maryland Land Use Article Title 7, Subtitle 3 binds a local governing body and a property owner to agreed uses, densities and public facility obligations. Section 7-304 freezes the local laws, rules, regulations, and policies in force when the parties execute the agreement.

Land Use § 7-303 sets the mandatory contents — legal description, duration, permissible uses, density, maximum height and size, permits required or approved, and consistency with the comprehensive plan. Subparagraph (a)(10) is the cost-sharing hook, reaching land dedications and the construction or financing of public facilities. That provision is where a builder converts a vague expectation into a defined obligation with a defined price.

The trap is procedural and unforgiving. Section 7-305(d)(1) voids a cost-sharing agreement not recorded in the local land records within twenty days after execution, and the clock runs from execution rather than approval. Section 7-306 cuts both ways: a county cannot compel a builder into one, and no county is required to offer one.

Insist on these in the public-facilities provision:

1. A defined scope of work with plans, specifications and a phasing schedule attached.
2. A cost cap, so escalation doesn’t land entirely on the builder.
3. A duration longer than five years where entitlement and construction will take longer.
4. Credit provisions offsetting the contribution against impact fees otherwise due.

When Is It an Impact Fee and When Is It an Excise Tax?

A Maryland impact fee is a regulatory charge whose amount must relate closely to the cost of facilities serving the new development, with revenue benefiting the assessed property. An excise tax raises general revenue, need not track actual cost, and may be spent throughout the county.

Maryland has no general statewide impact fee enabling act. Authority arrives county by county through public local law, which is why these cost-sharing charges differ so sharply and why the label on an ordinance settles nothing.

Two decisions frame the analysis. In Eastern Diversified Properties, Inc. v. Montgomery County, 319 Md. 45 (1990), the Court of Appeals struck Montgomery County’s road impact fee as predominantly a revenue-raising measure, and therefore an unauthorized tax. Waters Landing Ltd. Partnership v. Montgomery County, 337 Md. 15 (1994), later upheld the successor charge as an excise tax authorized by Chapter 808 of the Acts of 1963.

The Attorney General collected both in 89 Op. Att’y Gen. 212, which sets a two-part rational nexus test: a reasonable connection between the charge and the needs new development generates, and revenue earmarked for the substantial benefit of the property charged.

Ask these questions before treating a charge as fixed:

• Which enabling act authorizes it, and does the county code track that grant?
• What may the proceeds fund — Anne Arundel County Code § 17-11-209(a) restricts collections to capacity expansion for public schools, roads and public safety facilities.
• How does it escalate, since Montgomery County adjusts biennially by a construction cost index while Prince George’s adjusts annually by CPI.
• Are credits available for improvements the builder constructs directly?

What Changed for Maryland Homebuilders Under the Housing Certainty Act?

Chapters 590 and 591 of the Laws of Maryland 2026 add Land Use Article Title 12 and Local Government Article § 20-128. Development excise taxes and impact fees on residential projects may not be collected until construction is complete and certificate of occupancy requirements are met, subject to stated exceptions.

The Maryland Housing Certainty Act moved through the General Assembly as SB 325 and HB 548, and both cross-files became law with an October 1, 2026 effective date. Title 12 supplies statutory vesting: an application is governed “only by the duly adopted laws and regulations in effect at the time of submission of a substantially complete application,” and an approved project vests for the longer of five years or a period the local authority sets.

Section 20-128 changes cost-sharing from cash flow rather than cost. An excise tax or impact fee on a residential project may not be collected until construction is complete and occupancy requirements are met, moving the charge from permit issuance to the end of the build.

Three qualifications matter: it may be collected as a precondition to final inspection but not more than thirty days before it; the deferral doesn’t reach charges financing county debt incurred on or before January 1, 2026; and a jurisdiction may still withhold the occupancy permit for nonpayment.

Re-sequence the pro forma accordingly:

1. Move impact fee outlays from permit issuance to final inspection in the cash flow model.
2. Confirm the county’s collection practice, since local implementation will vary early on.
3. Treat mixed-use projects as covered, since the definition reaches developments containing residential units.
4. Document the submission date of a substantially complete application, because vesting runs from it.

Is There a Constitutional Limit on What a Municipality Can Demand?

Permit conditions requiring a developer to give up property must satisfy the essential nexus and rough proportionality standards of Nollan and Dolan. In Sheetz v. County of El Dorado, the Supreme Court held that the Takings Clause does not distinguish between legislative and administrative permit conditions.

A condition must bear an essential nexus to a legitimate government interest under Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and be roughly proportional to the development’s impact under Dolan v. City of Tigard, 512 U.S. 374 (1994). Koontz v. St. Johns River Water Management District, 570 U.S. 595 (2013), extended that analysis to monetary exactions and permit denials — which brings ordinary cost-sharing demands within its reach.

Sheetz v. County of El Dorado, 601 U.S. 267 (2024), removed a defense counties had relied on: conditions “are not exempt from scrutiny under Nollan and Dolan just because a legislature imposed them.” Read it carefully, though, because it decided less than its reputation suggests. The Court expressly reserved whether a condition imposed on a class of properties must be tailored with the same specificity as one targeting a particular development, leaving schedule-based fee formulas unsettled. We have found no reported Maryland appellate decision applying Nollan and Dolan to a development exaction.

Build the cost-sharing record while the condition is still being negotiated:

• The traffic or facility study the jurisdiction relies on, and its stated methodology.
• Your own impact analysis, quantifying what the project actually generates.
• A cost estimate for the demanded improvement, benchmarked against a proportionate share.

Who Guarantees the Improvements, and Can a Builder Recover Oversizing Costs?

Maryland’s Land Use Article authorizes local subdivision regulations to set what improvements must be completed before plat approval, but no state statute prescribes performance security or creates a reimbursement right for oversized infrastructure. Both terms come from county regulations and the cost-sharing agreement the builder signs.

Section 5-102 lets subdivision regulations determine the extent to which grading, street improvement, erosion control and utility installation happen before plat approval. It says nothing about bonds or letters of credit. Section 5-201(b)(2) adds a point builders forget — plat approval “does not constitute or effect an acceptance by the public of any street or other open space shown on the plat.”

The one express statutory security requirement sits with WSSC. Under Public Utilities § 23-201, a builder in the Montgomery and Prince George’s sanitary district installs subdivision lines at its own expense, enters a Commission agreement, and posts both performance and payment security. Everywhere else, the terms are local.

Oversizing works the same way: no Maryland statute lets a builder recover the cost of infrastructure built larger than its project needs, which makes the DRRA public-facilities provision the vehicle for capturing it. Prevailing wage deserves a look too, since State Finance and Procurement § 17-202 reaches public work contracts of $250,000 or more involving a public body.

Negotiate these cost-sharing terms before signing the public works agreement:

• Phased bond reductions tied to inspection milestones rather than final acceptance.
• A capped maintenance bond with a fixed warranty period, since no state law sets one.
• A written reimbursement provision naming the recovery pool, a latecomer charge, a sunset date and an assignment right.
• A prevailing wage determination in writing before public money touches the improvement.

What Can the State Highway Administration Require for Site Access?

Maryland Transportation Article § 8-646 requires a permit for any work in a State highway right-of-way and authorizes the Administration to condition that permit, including by requiring performance and payment bonds. COMAR 11.04.05 governs commercial, industrial, and subdivision entrance permits and the improvements that accompany them.

Access to a State highway is a separate approval on its own track, and it routinely controls the project schedule. The Administration’s authority extends past the apron: COMAR 11.04.05.02F(4) contemplates a separate plan for entrance construction and “any roadway improvement deemed necessary by the Administration,” and the agency’s guidance confirms improvements are required based on the traffic impacts a development generates, including acceleration, deceleration and turning lanes.

That scope is bounded, and the boundary matters to any cost-sharing negotiation. What the Administration conditions is work within the State right-of-way, scaled to the development’s own impacts, which lines up with the proportionality analysis above. Ownership also varies along a single corridor, since the Baltimore-Washington Parkway is split between State and federal control.

Resolve these cost-sharing questions during traffic study scoping:

• Which agency controls the frontage, particularly along corridors with mixed ownership.
• The trip generation methodology and study area boundary, agreed with staff before the study runs.
• How the access permit sequences against county plat approval, so the two don’t deadlock.

Which Site Costs Get Underestimated at the Term Sheet?

Maryland requires environmental site design to the maximum extent practicable under Environment Article § 4-203, with the developer bearing the burden of demonstrating it. The Forest Conservation Act applies to subdivision plans and grading permit applications on areas of 40,000 square feet or greater.

Environment § 4-203 requires local ordinances to make a developer “demonstrate that environmental site design has been implemented to the maximum extent practicable and standard best management practices have been used only where absolutely necessary.” That burden shapes layout and cost from the first sketch, and any payment in lieu of on-site management comes from the local ordinance rather than state law.

Forest conservation deserves fresh attention. A 2023 overhaul was delayed two years and took effect July 1, 2026, so much of the guidance still circulating predates it. Under the current Natural Resources § 5-1606, forest removed is reforested at one acre planted per acre removed, dropping to a half acre per acre inside a Priority Funding Area where the forest is not a priority for retention. Unforested riparian buffers must now be afforested. Payment into the Forest Conservation Fund remains available under § 5-1610 only where on-site and off-site work cannot reasonably be accomplished and no mitigation bank credits are available.

Price these cost-sharing exposures before the term sheet, not after:

• Environmental site design area as a percentage of gross acreage, tested against the yield plan.
• Forest stand delineation early enough to influence layout rather than validate it.
• Reforestation obligations at the current ratios, including riparian buffer work.

Negotiate Maryland Infrastructure Obligations Before They Become Permit Conditions

Once a contribution appears as a condition of approval, the remaining options are to accept it, appeal on the record already made, or walk. A builder’s bargaining position in an infrastructure cost-sharing negotiation exists earlier, while the jurisdiction still needs an agreement and the study supporting its demand is still being scoped.

Our experienced attorneys negotiate and draft development rights and responsibilities agreements, public works agreements and cost-sharing reimbursement provisions, and represent Maryland builders in disputes over permit conditions. Contact our office today to schedule a consultation.

Frequently Asked Questions About Maryland Infrastructure Cost-Sharing Agreements

Can a Maryland County Require a Builder to Pay for Improvements Off the Development Site?

Yes. Land Use Article § 7-101 authorizes local laws requiring off-site improvements or land dedication for public facilities essential to a development. Any such cost-sharing condition still has to bear a nexus to the project’s impacts and be roughly proportional to them.

Is a Development Rights and Responsibilities Agreement the Same as a Public Works Agreement?

No. A DRRA is a statutory instrument that fixes entitlements and freezes applicable law, while a public works agreement governs how improvements get built, bonded and accepted. Many cost-sharing arrangements need both, and the two should cross-reference each other.

Can a Municipality Change the Rules After a Cost-Sharing Agreement Is Signed?

A recorded DRRA freezes the local laws and regulations in force at execution. The jurisdiction keeps a narrow power to require compliance with later-enacted laws where it determines compliance is essential to public health, safety or welfare, so the freeze is strong but not absolute.

Who Owns the Infrastructure After a Builder Constructs It?

Public improvements are typically dedicated to and accepted by the jurisdiction or utility, but acceptance is a distinct step following inspection and any warranty period. Approval of a plat showing a street is not public acceptance of it.

What Happens to a Cost-Sharing Agreement if the Builder Sells the Project?

A recorded cost-sharing agreement runs with the land and binds successors, which is one reason recording within the statutory window matters. Reimbursement rights and bond obligations should be addressed expressly in the purchase agreement, since they don’t always transfer cleanly on their own.