The Montgomery County Council said this week the county will lose $16.7 million in estimated tax revenues this year if state legislators approve a proposal by Acting Maryland Gov. Blair Lee III to lower assessment rates for homeowners.
Council President Elizabeth Scull and council member Neal Potter said if the General Assembly approves Lee's proposal, Montgomery County may have to increase the local tax rate to make up for the revenue loss.
"I think it would be likely to go up a nickel," said Potter, an economist and the tax expert of the council. "That's about the 1 per cent increase."
As part of a package of legislative proposals outlined by Lee last week, residential property would be assessed at 45 per cent of its market value instead the 50 per cent rate now required by state law. If approved, the proposal would take effect immediately and would apply to tax bills to be sent out July 1.
A crucial part of the package was a proposed Constitutional amendment to allow different assessment rates for residential and commercial property. Most of Lee's other proposals hinge on approval of the amendment, which must be passed by the legislature and then voted on by the public.
Incldued in Lee's proposals was a seven-point bill that would further ease the tax burden for homeowners. Among provisions of the proposals: Assessing homes every three years instead of annually as is now the case; limiting assessment increases to 18 per cent in any three-year period and giving homeowners a credit of $5,000 on their tax bill. The last proposal automatically would reduce a homeowner's assessment by $5,000.
Potter said he believed the proposals would be good for the homeowners.
"My feeling is that the people who need the relief the most are the single-family homeowners," he said. Taxpayers have complained for the past five years about assessments that have been increasing about 12 per cent annually.
"The governor is reacting to the same tax-rate we're reacting to," said Scull, who is Lee's sister, "but this makes our job a little more unpleasant."
In November, when the county estimated they would receive $542 million more in tax revenues than last year, which totaled $491.6 million, they were counting on a surplus of about $19 million. Potter said then the surplus could be used for expanded county services and would allow the county to cut the property tax rate by 5 per cent.
But approval of Lee's proposal would mean the county would have almost no surplus. "If the expected growth is reduced from $54.2 to $37.5, and normal expenditures are up $35.5," said county fiscal officer Art Spengler, "you've just about balanced the budget."
"I had hoped that during the budget season, we would provide decent cost-of-living increases for county government employees," said Scull. "I was thinking in terms of 5 per cent. I was hoping we could cut the tax rate and that we could take care of needed services - nothing extravagant, mind you.
"Now, we can't cut the tax rate. I had hoped we could have some programs in the area of youth services."
Scull said she did not know what services would have to be cut or how much the cost-of-living increase would be if Lee's proposals are approved.
County Executive James P. Gleason is not pleased with the proposals, said Gleason's aide, Charles Maier. "It puts Blair Lee on the side of the angels," said Maier. "GLeason thinks it's a little bit of a political slight of hand. He feels the property tax is the sole tax that the local jurisdictions have to go on."
Scull said she believed the General Assembly would have back Lee on the assessment cut, and because of that she and Gleason will send a joint letter to county agencies to tell them "the situations is tight."
"We just want them to keep their recommended budgets within some reachable parameters," said Spengler, "in case (Lee's Proposal) goes through the state."
Council members Norman Christeller and Esther Gleman said that although they generally supported Lee's proposals, they were concerned about county finances.
"If he can do it, so be it," said Gelman. "I just don't want to leave [WORD ILLEGIBLES] council with the problems we came in with. (The council before us) had used every penny in every pocket."
Potter said if the Lee's proposals for differential assessments were approved, it might even out the tax burden. While residential assessments have been rising rapidly, he said, commercial assessments have risen slowly.