Community Benefits: What To Know

This informational brief focuses on the current status of Community Benefits Agreements in the state of Maryland. It also presents community benefit options for communities to consider as they plan for the possibility of data centers in their local jurisdictions.

Community Benefit Agreements (CBAs) are legally binding contracts between developers, community groups and often government bodies. They seek to provide amenities and mitigations to help the local community. When all parties see the advantages of projects with real benefits it can set the stage for sustainable outcomes on a larger scale.

Maryland Provisions

Policy surrounding CBAs is grounded in the restraints put in place by the courts on contract zoning in Maryland. These restrictions are based on judicial decisions (case law) and not explicitly written in the Maryland Code. The Maryland Appellate courts (now referred to as the Maryland Supreme Court) ruled that local governments cannot bargain away this discretionary power through a bilateral contract with a developer. Key rulings affecting CBAs in Maryland are as follows:

1. Baylis v. City of Baltimore (1959) was a landmark decision finding that a city may not engage in contract zoning –a binding agreement with a property owner to rezone land in exchange for special covenants -- because it affects the jurisdiction’s independent police powers – see Note. The court viewed this action as impeding future legislative judgment.
2. Mayor and Council of Rockville v. Rylyns Enterprises, Inc. (2002)—further reinforced Maryland’s prohibition of contract zoning under land use laws. If a CBA conditions legislative zoning on a developer’s promise, it can be seen as unconstitutional bargaining.

What these decisions show us is that courts will strike down contract zoning because it bypasses the comprehensive zoning framework and grants special privileges to specific property owners in violation of statutory uniformity requirements.

Other Possibilities

Given these court rulings, are there other ways for CBAs to be pursued on a timely basis? In other words, is it possible to negotiate some form of early CBA to ensure commitments are maintained through the planning process?

The possibility does exist for an agreement to be signed between a recognized community entity such as a coalition, association, alliance or other form of recognized community group and developers. These approaches can identify local projects for affordable housing, clean energy upgrades and utility direct assistance. In some cases, they create sustainable solutions over time.

Private Contract: One approach is a private contract signed between community groups and developer(s). This approach can be sustainable over time if the community entity seeks leveraging from foundations and investors such as Climate Equity Investors. Like all contracts, they must be undertaken with the understanding that if a party breaks the contract, the other can sue in court.

Alliance: Understandings on all or part of the community benefit could be strategized by community stakeholders and developers to provide a roadmap and prioritization of benefit solutions including recommendations on implementers, instruments for engagements, timelines and other factors. These commonly agreed upon terms can be incorporated into a Memorandum of Understanding. While the output may not be legally binding, it does guarantee that the community directly gives input to the industry without 3^rd party involvement and that the solutions are not randomly offered but done in a process consistent with overall community needs.

Because of the government’s role in zoning, any government-driven CBA process with developers in Maryland must occur in the latter stages of the development process. Although discretionary on industry’s part, delay in CBA negotiation often leads to lower total funding as the development process and its complications can lower industry’s ultimate funds contribution at the final stages of development.

Other Considerations

How can funding be maximized and coordinated in a cohesive and meaningful way for both parties? One possibility would be to pursue a legislative solution that separates energy use/demand management and oversight (not mineral rights or other extractive processes) requirements from land-use zoning requirements.

With growing pressure on localized resources for data center operations, electrification, grid modernization and expansion, it is becoming increasingly imperative for local jurisdictions to have some accountability for local resource use/demand management and oversight. Not only should they be allowed to ask for reporting and monitoring to establish benchmarks on performance but negotiate together with local stakeholders community benefits early in the development process to gain industry support for community solar projects, small business and residential energy/water efficiency upgrades and other projects mitigating resource demand impacts. An additional benefit of this approach would be that community clean energy projects could be aggregated into a Virtual Power Plant solution to offset high electricity demand by data centers behind the meter.

Note: Zoning is the exercise of the State’s sovereign police power delegated to local jurisdictions to protect public health, safety, and welfare. A local jurisdiction cannot bargain away through a contract its future ability to act in the public’s interest through legislative action.