ANNAPOLIS – A property tax increase is the least desirable money-making option for localities to offset dwindling state funds, said county officials and taxpayer associations.
“We need to let local and municipal governments find other sources of revenue,” said David Bliden, executive director of the Maryland Association of Counties, during a joint hearing of the House and Senate tax-writing committees last week.
County governments have scrambled to find revenue alternatives to maintain existing services after the state cut $151.3 million in direct aid this fiscal year. Property taxes are a major, steady revenue source for county and municipal governments, contributing 25 percent to total local revenue for counties and Baltimore City in fiscal year 2003.
State funding for counties, excluding money for education, has decreased by 3.3 percent the past two years, Bliden said. As a result, 17 counties have raised taxes and other fees.
“Gov. Robert Ehrlich has reiterated he doesn’t plan to raise state taxes next year,” his Press Secretary Shareese DeLeaver said. But how the state’s budget will be balanced or whether programs will be cut is uncertain at this point, DeLeaver said.
“The budget team will continue to assess the fiscal situation before deciding on (state) property taxes” for next year, said Cecilia Januszkiewicz, deputy secretary of Budget and Management.
Carroll County considered adding 15 cents to its property tax rate this summer, in response to a possible shift from the state to the county, of the retirement costs of employees in public schools, community colleges and public libraries.
If the state does transfer payment in the future, the cost to the county would be about $14 million and local property taxes could increase, said Ted Zaleski, Carroll County management and budget director.
“The county can’t rule out possibilities in the future, especially since growing demand and the money necessary to meet these demands are greater than the revenue available,” Zaleski said.
The bulk of total state aid is allocated for education and isn’t given directly to the county government, he said.
For example, the Carroll County government was allowed $113,134 in direct aid this fiscal year, according to the governor’s fiscal year 2005 budget.
Property taxes account for half the county’s total revenue, and the county’s tax rate, $1.048 per $100, has remained unchanged recently.
Local jurisdictions have tried to minimize the need to raise the property tax rate.
Baltimore won’t increase the property tax — which at $2.328 is the highest in Maryland — next fiscal year, said Edward Gallagher, the city’s finance deputy director.
Instead, household energy and telephone taxes were expanded in August.
“Raising property taxes is not really a viable option,” said Rick Abbruzzese, deputy press secretary for Mayor Martin O’Malley. “We are trying to get people to move back to the city, not vice versa.”
Montgomery County recently reduced the property tax rate by 1 cent, which saves taxpayers $10.6 million, but also raised energy taxes.
County residents will vote Nov. 2 whether to take away the county council’s power to override a property tax cap, which holds annual increases in property tax revenues to the inflation rate.
The county’s property tax rate is $0.734, but its high assessable base generates considerable tax receipts.
Taxpayers tend to have the most grievances with taxes on real estate.
Property taxes come in the form of a separate bill, “a big lump sum” paid one to two times a year, whereas money taken from sales tax is minimal and income taxes are automatically deducted from paychecks, said Michael Sanderson, legislative director of the Maryland Association of Counties.
“It’s a tax on ownership that makes home ownership more and more difficult,” said Richard Falknor, executive vice president of Maryland Taxpayers Association Inc. Typically, property taxes hit fixed-income seniors and low-income homeowners hardest.