After several years of rapid growth built on a booming economy, county tax revenue growth is expected to slow this year because of the sagging housing market, the County Council learned last week.
Jonathan R. Seeman, director of the Office of Management and Budget, told the council that revenue that has been growing by double digits will grow by 3.8 percent in the fiscal year that begins July 1.
Still, Seeman told the council that there are some indications that the housing market is already recovering. Plus, he noted that forecasts show revenue continuing to rise, just at a slower rate than in recent years.
"When we say they're slowing down, what we're saying is that the growth is going back to more normal levels, rather than the exploding levels that we saw in 2005 and 2006," he said.
County Executive Jack B. Johnson (D) will use the revenue numbers to help shape a budget for the county, which will be submitted to the council for review in March.
According to Seeman, projections indicate that slightly less than $2.5 billion in revenue will be available to build that budget, of which $1.47 billion will come from county resources.
The numbers Seeman presented last week came from the annual report of the Spending Affordability Committee, issued in December. The report is an attempt to forecast how much money the county will gather through taxes in the next year, before the executive and council start discussing how to divvy up funding.
Seeman said the slowdown was most pronounced in transfer and recordation taxes, which are collected when homes are sold. Revenue from the two taxes is expected to fall by $26 million next year, a drop of 13 percent.
He displayed numbers showing that almost 32 percent fewer homes were sold in December 2006 than in December 2005. "This is the heart of what's going on," he said.
Property taxes, the largest source of local government revenue, remain strong, he said, in part because homes are assessed every three years, making the numbers less susceptible to temporary swings in the market.
One-third of homes are assessed each year; in Prince George's, homes assessed this past year rose 80 percent in value from three years earlier. The increase was greater than in other counties in the region, which will result in rising tax bills for homeowners but indicates the housing market may be stronger in Prince George's than in surrounding areas.
Seeman said that in general, Prince George's revenue numbers reflect regional and national trends that so far have hit the county less hard than elsewhere.
"Their declines were actually steeper than ours," he said. "Some of our numbers are not favorable, but theirs are even worse."
Estimating tax revenue for the next year is a critically important part of the budget process, because it determines how much money government has to spend on areas such as education, police and social services.
Prince George's voters approved a change to the county charter in November that gives the County Council new power over revenue estimates.
With the change, the council has the right to adjust Johnson's revenue predictions by 1 percent. If the council declared that tax revenue would bring in 1 percent more money than Johnson predicted, it would then have more money available for its projects.
Seeman said the council and the executive's staff have not discussed how the new power will work or at what point in the budgeting process council members will decide whether they wish to exercise it.
"We will begin discussions with the council and will continue to do that up until the budget is released," he said.