Montgomery County Council members are considering raising the county's energy tax for the third consecutive year.
With final decisions on the 2006 budget expected by late next week, members have all but conceded they can't make enough reductions in County Executive Douglas M. Duncan's $3.6 billion fiscal plan to comply with a voter-imposed charter provision limiting taxes and spending.
With some members threatening to derail a final budget compromise unless it includes a significant cut in the property tax rate, a movement is afoot is to reach the charter limit by raising revenue from the energy tax, which currently costs the average residential consumer of electricity, gas or oil about $96 a year.
"Certainly that is something that will be on the table," said council President Tom Perez (D-Silver Spring).
In 2003, the council tripled the energy tax, which shifts some tax burden from homeowners to businesses, to help make up for reductions in state aid. Last year, the council raised it by 50 percent to pay for additional spending and a 1-cent cut in the property tax rate. Overall, the energy tax for the average home has increased from $23 to nearly $100 since 2003.
Those increases were supposed to expire next year. But Duncan has proposed retaining the current rates as part of his budget.
As of yesterday, no council member had formally raised the idea of increasing the energy tax again. But that could change as early as today.
"It's clear the only the way council is going to get to the charter limit is through an offset of the energy tax," said Phil Andrews (D-Gaithersburg), one of the biggest proponents of reaching the charter limit. It would take the support of seven of the nine council members to override the limit.
Republican leaders, who plan to make the council's appetite for spending and taxes a major issue in next year's election, belittled the idea of raising one tax to cut another.
"This is just a smoke-and-mirrors game," said Tom Reinheimer, chairman of the Montgomery County Republican Party. "It's clear they got a spending problem and they can't rein it in."
Even Duncan (D), who has criticized the council for cutting his budget, ridiculed suggestions of higher energy taxes.
"It looks like it's just a shell game," he said. "If they want to cut property taxes more, then cut my budget but don't raise taxes."
Perez's response to Duncan: "He's the one who is eliminating the sunset on the energy tax, so he has already violated his own principle."
The charter amendment limits the county to collecting property taxes equal to the previous year's total, plus inflation and the value of new construction. To adhere to the cap, the council would have to reduce the property tax rate by 7 cents per $100 in assessed value.
That would mean about $70 million in cuts to Duncan's budget. His budget includes a 2-cent property tax cut but would exceed the charter limit for the fourth consecutive year.
So far, the council has identified about $25 million in possible reductions. Assuming the council doesn't restore any of those cuts, the energy tax would have to be raised by about 40 percent to reach the charter limit.
Andrews said homeowners should embrace the tradeoff. At the charter limit, the owner of a $400,000 home would pay slightly more in property taxes than this year-- about $86 -- but about $300 less than under Duncan's proposal. Energy taxes would increase by $40.
Council member Howard A. Denis (R-Potomac-Bethesda) said he can't support a last-ditch effort to raise the energy tax this year, even if means a stalemate over the budget.
"We could have a real deadlock here," Denis said.
