Maryland Comptroller Peter Franchot is investigating evidence that the state shortchanged Montgomery County of millions of dollars in local income tax revenue when it mistakenly sent the money to county municipalities instead.
Andrew Friedson, a spokesman for Franchot (D), declined Tuesday to specify an amount or how the county might receive payments that are due. County officials estimate a loss of $12 million to $15 million as a result of the misdirected money.
Friedson said the office will hire an outside consultant to determine exactly how much money was involved and how the mistake happened.
“Essentially we made a mistake and we’re admitting and recognizing the mistake,” Friedson said. He added that although the office is aware of issues only in Montgomery, the outside review will look at all jurisdictions “as a matter of fairness.”
Under state law, Montgomery’s 19 municipalities receive 17 percent of local income tax revenue collected by the state. The rest goes to the county. From 2010 through 2014, the comptroller’s office coded households located outside municipalities as if they were inside, meaning that an additional 17 percent of their tax payments went to a town and not to the county.
Friedson declined to say which municipalities received the extra money. County officials said Chevy Chase, Rockville and Gaithersburg appear to have received most of it.
County Council members said Tuesday that the issue needed to be resolved quickly, given budget challenges in the coming fiscal year.
“The county needs to be made whole and the municipalities have to be dealt with equitably and fairly,” council member Roger Berliner (D-Potomac-Bethesda) said.
Friedson said the problem came to light through a routine reconciliation of accounts. But Chevy Chase Mayor Al Lang said Tuesday that the state was prodded to action by a working group he formed this year to improve the town’s revenue forecasting. Income tax revenue seemed unusually volatile year to year, he said.
“I was always concerned we didn’t understand the dollars coming in,” Lang said.
He said the group noticed that in 2010, the number of town households in the comptroller’s records jumped from 1,500 to 2,700. When the town asked the office to help verify the addresses, officials said they could not, Lang said.
The town eventually enlisted State Sen. Richard S. Madaleno Jr. (D-Montgomery) to intervene with the comptroller’s office, Lang said. Officials informed the town that it had received $4.9 million too much and would have to pay it back. He said Madaleno also played a key role in bringing to light excess revenue payments to Rockville and Gaithersburg.
Madaleno did not return a call seeking comment Tuesday.
Friedson declined to discuss specific dealings with town officials, or who may have brought information to light.
Should Chevy Chase have to pay money back to the county, it is in a good position to do so. The town, which has a median household income of $250,000, has a budget surplus of about $8 million.
“I do understand that if it’s not our money,” Lang said, “it has to be resolved somewhere along the way.”