Montgomery Passes Preliminary Budget That Raises Tax Bills

Montgomery County Council members unanimously backed a $4.3 billion budget yesterday that would increase property tax bills for the average homeowner by about 13 percent and leave labor union contracts untouched.

Council members reached consensus, after being evenly split one day earlier, by cobbling together a deal that upholds labor agreements; requires trims to government and school system operations; and taps funds for capital projects to balance the books for fiscal 2009.

With the preliminary vote, Montgomery joins several local governments in leaning more heavily on taxpayers amid a stagnant economy and sagging real estate prices. Last month, Fairfax County increased its property tax rate by three cents; Prince William County approved a 21-cent increase; and Loudoun County added 18 cents to its rate.

Although Montgomery avoided raising its tax rate, council members voted to exceed the cap on how much the county can collect from homeowners in a given year. That effectively raised property taxes.

The District raised tobacco and business taxes in a budget passed this week but kept the property tax rate steady and has been largely insulated from the real estate downturn.

In Montgomery, council members Phil Andrews (D-Gaithersburg-Rockville) and Duchy Trachtenberg (D-At Large), who had pressed to roll back raises for workers by two percentage points, said they were satisfied that the compromise would reduce personnel costs.

"It's not as broad as I would have liked, but it is the most the council would agree to," Andrews said after the vote. "It is a step in the right direction and keeps the pressure on the executive and the school system to restrain employee costs."

In the past decade, spending in Montgomery has outpaced inflation, population growth and public school enrollment. Revenue from income and real estate taxes has not kept up in the past year, and increases in state aid have declined.

Elected officials in Montgomery began this year's budget debate staring down the county's deepest ever potential shortfall. To close the nearly $300 million gap, council members agreed in a temperature-taking vote yesterday to hold the property tax rate at the current level instead of raising it by 7.5 cents, as County Executive Isiah Leggett (D) had recommended. Homeowners also would receive a tax credit of $579 for primary residences to reduce the impact of rising assessments, measured over a multi-year period.

Even so, residents would pay an average of 13.4 percent more in taxes in fiscal 2009 if the final budget is adopted Thursday, as expected.

"It doesn't mean they're not going to pay more, but we've gone to great lengths to minimize how much more," said County Council President Michael Knapp (D-Upcounty), who broke the stalemate late Thursday after shuttling between council members' offices.

The council's action means the panel will exceed the county charter's limit on property tax revenue for the fourth time in 17 years. The limit ties increases to the rate of inflation, on average 3.6 percent.