A hearing on a bill that would eliminate a long-standing tax on Prince George's County home buyers created unexpected political bed-fellows last week.
Supporters of the county schools lined up with County Executive Lawrence J. Hogan to aruge in favor of retaining the "transfer tax" -- paid by a home buyer at the closing -- that amounts to one percent of the cost of a newly bought house.
On the other side were several members of the country council, led by member Gerard T. McDonough, and representatives of the building and real estate industries, who believe the tax discourages would-be homeowners.
The transfer tax is the third largest source of country revenue. It raised some $11 million last year.
McDonough said the county could balance the lost transfer-tax revenues against surpluses such as those that occured in 1979 and 1980, and, he said, allowed Hogan to cut property taxes last year.
But Hogan aide Ed Sealover, who represented Hogan at the county council hearing, said the recent surpluses were due largely to an increase of $25 million in state aid that may not be repeated in the future.
Last week, in fact, state Comptroller Louis Goldstein said the state, after three years of large budget surpluses, is headed for a fiscal squeeze due to a deepening recession that has caused decreases in both state income and sales taxes.
Sealover said if there is a surplus, Hogan would cut property taxes and would refuse to use the surplus to make up for the lost transfer-tax revenues.
Hogan has indicated in a letter, that, to make up the differences if the bill passes and transfer-tax revenues are lost, he would not increase property taxes but would instead cut school and other expenditures.
He wrote letters to school board chairman Jo Ann Bell and county PTA president Joanne Brown "advising" them that if the bill passed, $6 of every $10 he would seek to cut in the budget would be from the school budget.
Both Bell and Brown felt they had little choice but to join the fray on Hogan's side.
"He's very adamant about it -- he will not increase property taxes. Until we can modify TRIM (the county's amendment limiting taxes) we can't do anything," said Brown, head of the countywide PTA organization representing about 25,000 members.
"It's a political game they're playing. It's obvious what they're doing. I don't think they should sacrifice the children in the process."
School board chairman Bell, explaining why she felt forced to join Hogan in his fight against the bill, said, "Our understanding was that (passing the bill) would translate into (losing) $7.5 million out of our budget. I get goose pimples just thinking about it.
"I guess every agency that has to account to fiscal authorities ends up being the ping-pong ball," she added.
The budget the school system requested last spring was reduced by $3.6 million due to Hogan's austerity measures.
McDonough said he first encountered the transfer tax in 1974 when he had to come up with an unexpected $400 at closing time on the first home he bought. One of his few campaign promises, he said, was to eliminate the tax.
"A lot of times, the settlement costs are the difference between people being able to buy or not. Settlement is a horrifying experience for some new buyers," said McDonough.
Sealover countered that the high cost of bricks, mortar and interest are more to blame for home buyers' problems.
According to a study by the county finance department, the transfer tax amounts to about 18 percent of the buyers' closing costs, which also includes attorneys' fees, Realtors' commissions and other costs.
Even if the tax is a small part of the problem facing new home buyers, the county should do what it can to help, said Mike Casey, president of the County Board of Realtors.
"How many people have given up (on buying a house) because they couldn't go the last inch?" Casey said in an interview. He conceded that Realtors would gain by any increase in home buying the bill might produce.
The outlook for the bill as written is uncertain, according to McDonough. Sealover predicted, however, that an ammended version of the bill phasing out the tax over three years mght have a good chance of passing county council.
The county council is expected to vote on the measure within the next month.