Montgomery Weighs Rise In Energy, Land Taxes

By Ann E. Marimow
Washington Post Staff Writer
Wednesday, April 16, 2008

Montgomery County residents would pay more to heat their homes and keep the lights on, under two council proposals introduced yesterday that would raise local energy taxes to help balance the budget and encourage conservation.

Separately, the council signaled that it probably would increase property taxes this spring, although not to the level recommended by County Executive Isiah Leggett (D) in his spending plan for fiscal 2009.

The energy tax measures, which would each raise $11 million, are meant to give the council flexibility to scale back Leggett's call for the largest property tax increase in two decades to close a $297 million shortfall.

The initiative by council member Nancy Floreen (D-At Large) would encourage residents to use environmentally friendly power by imposing the highest rate increases on the "dirtiest" energy sources that generate carbon dioxide and other greenhouse gases.

Under her plan, an average homeowner would pay less than $10 more a year. Tax rates on electricity and fuel oil would increase 10 percent, while rates for natural and liquefied petroleum gas would rise by 5 percent.

"With all of us tightening our belts, there are some who would say this isn't the time to ask our residents for more. I have to agree," she said at the council's meeting yesterday. Floreen said, however, that she was looking for ways to lower Leggett's proposed property tax rate increase of 7.5 cents "so that, essentially, we can keep ourselves on track with environmental preservation without doing harm to residents' pocketbooks."

Council President Michael Knapp (D-Upcounty) also introduced an energy tax measure, which he called a placeholder, that would raise $11 million by increasing rates across the board by about 9 percent.

In the past five years, county leaders have repeatedly turned to the energy tax to cope with budget shortfalls. In 2003, the council tripled the tax, costing the average residential household an extra $40 a year. In 2004, the council signed off on a 52 percent rate increase, costing homeowners about $37.

Total energy taxes depend greatly on consumption and the type of fuel used. Residents on average paid $88 a year in total energy taxes in fiscal 2007. Pepco's residential customers in Montgomery on average paid $66 in annual taxes on electricity alone, while large commercial customers paid $2,600.

Leggett resisted proposing a rate increase because "energy costs are already sky-high," he said in his budget rollout speech. His $4.3 billion spending plan would raise the property tax rate an average of 8 percent and provide a $1,014 credit for a homeowner's primary residence.

Joe Beach, Leggett's budget director, said yesterday that the administration would reserve judgment on the council's specific proposals until it has studied the fine print.

Council member Valerie Ervin (D-Silver Spring) expressed reservations about the impact on the county's renters, who would pay for the increases through higher energy bills or rents.

"Those are the folks who are really going to take it on the chin," she said.

Council members George L. Leventhal (D-At Large) and Roger Berliner (D-Potomac-Bethesda), who have worked on other initiatives to encourage the use of clean power, said they would be inclined to back a rate increase if part of the new revenues funded energy conservation programs.

"Having a carbon tax is a direction we need to go as a society, but it bears some thinking whether it can be done in one county," Leventhal said. "If we are going to have a price for power that is substantially higher than Fairfax and Prince George's, we may get to a tipping point where businesses don't want to locate here because the price of energy is so high."

In a separate debate over property taxes yesterday, council members left in place spending guidelines that hold taxes to the county's charter limit. Council members Phil Andrews (D-Rockville-Gaithersburg) and Duchy Trachtenberg (D-At Large) said it was fiscally prudent to aim for the limit, which generally holds property tax increases to the rate of inflation.

Most of their colleagues suggested, however, that the council would exceed the limit when it makes final decisions about the budget in May. Sticking to the limit would require the council to come up with at least $111 million more in revenue or cuts.

"I see no way that we could make up this money through anything other than magic," council member Marc Elrich (D-At Large) said, calling a property tax increase all but inevitable. "It's unrealistic to say we're not going to go there; it's a question of how much we're going to go there."

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