Cecil County to Debate Assessment Cap Under Homestead Tax Credit

July 21, 2014

Cecil County Councilwoman Diana Broomwell recently introduced legislation to reduce the assessment cap under the county’s Homestead Tax Credit program from 8% to 4%. As reported  by the Cecil Whig,

The policy, known as the Maryland Homestead Tax Credit, was designed to help homeowners deal with large assessment increases on their principal residence during times of escalating home prices.

The state has set this limit at 10 percent for its portion of the tax bill. However, counties and towns are allowed to reduce their portion below 10 percent of the tax bill.

In simple terms, a credit is applied to assessments that go up at a rate of greater than 10 percent to bring it down to 8 percent for tax purposes, not actual market value.

For example, if an old assessment was $100,000 and a new phased-in assessment for the first year is $120,000, then limiting the increased assessment to only 10 percent would translate to $110,000.

That difference of $10,000 is the amount to which the tax credit would apply.

The Council will discuss the fiscal effects of this legislation during a public hearing scheduled for August 19, 2014 at 7:00 pm.  If the legislation passes, it would take effect July 1, 2015.

Carroll County Energy Audit Designed to Yield Savings

July 18, 2014

As reported by the Carroll County Times, Carroll County Commissioners approved an energy audit contract during their meeting yesterday to help the county save money on energy costs.

From the article:

The contract was awarded to Johnson Controls, a company specializing in identifying and improving energy efficiency in work spaces. The company will review energy uses in between 30 and 35 buildings.
Johnson Controls guarantees that the county will recoup any money spent on the audit and future improvements through energy savings they identify during the audit, according to Scott Moser, deputy director of the Carroll County Department of Public Works. The company has been performing work for the county since 1998.

In performing the audit,

G. Michael Whitson, chief of the Bureau of Facilities, said the company will bring in a team of engineers and specialists to review all county buildings over a three-month period. The county has added a lot more buildings to its inventory, including the South Carroll Senior and Community Center, and has changed buildings since the last time there was an energy performance audit.

Municipal Bond Rating Changes Raising Questions

July 17, 2014

One of the major credit rating agencies, Standard & Poor’s, announced its intention to redefine its rating system for municipal bonds issued by all state and local governments, to better reflect the different measures od creditworthiness applicable to public sector entities. For more background, visit their website’s section on “understanding ratings.”

Governing magazine writes that industry analysts have noted added variability in ratings that have arisen since S&P made these changes. From their article:

Since last fall, when S&P released new scoring criteria, the agency has been reassessing ratings for thousands of local governments. Generally, and as predicted by S&P itself, the new criteria resulted in more upgrades of governments than downgrades. But a Janney Montgomery Scott analyst pointed out in his July note on the bond market that those changes have not put S&P’s ratings more in line with competitors Moody’s Investors Service and Fitch Ratings.

In some cases, rather, agencies’ ratings scores for the same local governments have diverged even more.

Read the full article in Governing magazine online.




Baltimore County Offers In-Kind Contributions Towards Red Line Transit Project

July 11, 2014

As plans move forward for the construction of the Baltimore area Red Line transit project, the Maryland Transit Administration (MTA) has been negotiating local contributions from Baltimore City and Baltimore County for the building of the project. In a letter to state transportation officials, Baltimore County Executive Kevin Kamenetz outlined his views on the county’s participation in the project.

As reported by the Baltimore Sun,

Kamenetz outlined his stance in a letter to state officials late last month, saying the county is willing to pay $26.5 million in “in-kind” contributions for the transit line — covering street realignments, stormwater management and sidewalk construction, among other things. The state has asked the county for $50 million, and Baltimore City for $200 million.

The Red Line is a proposed 14.1 mile light rail route that would run from Woodlawn in Baltimore County to Johns Hopkins Bayview Medical Center in East Baltimore. The project is expected to cost $2.6 billion.

According to Deputy Secretary of Transportation Leif Dormsjo,
The federal government has identified the Red Line — and the Purple Line in Prince George’s and Montgomery counties — for substantial federal funding, but that prioritization is based on a number of factors, including local buy-in, Dormsjo said.

“They like to see their federal dollars go further. They like to see more skin in the game,” he said. “We expressed that point to all of the executives in charge of the local jurisdictions, and they all get that, but they have all said they need some time to find the means to accomplish that, and they want flexibility.”

MACo Developing OPEB Trust For Long-Term Investments

July 11, 2014

MACo’s Board of Directors launched an initiative in 2013 to build out an Investment Trust vehicle, to offer service to county governments who have resources committed to their long term liabilities for retiree health care and various “Other Post Employment Benefits” (or OPEB). Currently every Maryland county carries some liability in this regard, and rule changes by the Government Accounting Standards Board have obligated these long term liabilities to appear in a fashion similar to pension obligations.

What Are the Goals of the Trust?

Maryland law has a specific provision to help governments invest toward these costs. In general, “public funds” (including the operating account of county governments, and short term investments as well) are to be invested along very limiting guidelines adopted through state law. However, that law specifically recognizes that long term investments toward long term obligations, when placed in a formal trust, may be invested with a broader and more balanced approach to generate long term yields. This applies not only to pension systems, but also specifically to OPEB trusts.

Counties are in many different phases of addressing these costs and investments. Some counties have created a formal OPEB trust locally, with varying amounts of committed funds already invested. Others do not have any such vehicle in place, and are unable to make the investments beyond the limiting scope of the “public funds” state law. Others still have a vehicle in place for their county, but have units of government they support who do not have access to a similar vehicle.

MACo hopes that the OPEB Trust in development will provide a safe, simple, and effective vehicle for county governments to invest these long term assets toward their long term costs, while reducing administrative and legal costs. MACo has retained the services of financial management advisors and legal counsel to develop a draft Trust agreement, and is in the process of soliciting initial Trustees for the fledgling enterprise.

Who Would Benefit From the OPEB Trust?

  • County governments without their own trust would benefit by bypassing the cost and complexity of creating a local trust, and simply creating an account with the MACo OPEB Trust
  • County governments with their own trust in place would benefit by joining a larger scale trust, as investment advisory fees are generally “tiered” down based on the portfolio size
  • Counties with supported units (community colleges, libraries, or other similar entities) who don’t yet have an investment structure could also participate and reap similar benefits
  • Municipal governments have expressed interest in the investment vehicle, and under the draft trust agreement, would be able to reap the same benefits

MACo hopes to have an initial slate of Trustees in place and an RFP for investment advisors released in the coming months.

If you or your county have questions about the developing OPEB investment trust, please contact Michael Sanderson at the MACo offices for more details. MACo and the advisors helping to develop the Trust would be pleased to follow up either via email, phone, or in person to explain the benefits and the timing.


Senators Cardin and Mikulski Push For Federal Water Infrastructure Funding

July 11, 2014

A July 7 Baltimore Sun B’More Green blog post reported that after touring Baltimore City’s 99-year Montebello water treatment plant, United States Senators Ben Cardin and Barbara Mikulski reiterated their intent to seek federal funding for upgrading aging and failing water system infrastructure.

“This is no longer state of the art,” Cardin said of the filtration plant, which was completed in 1915.  …
“We need to make a commitment to our water infrastructure,” said Cardin. He has introduced a bill to provide $50 million a year in matching federal grants to communities to make their systems more resilient and sustainable in the face of changing climate conditions. As chairwoman of the Senate Appropriations Committee, Mikulski has pushed for $200 million in increased funding in a pair of measures.

“We’re not saving money by not modernizing,” said Mikulski, who noted that her great-grandfather had worked as a ditch digger in the 1880s, helping lay water lines in the city. She and Cardin marveled at an old wooden pipe on display at the plant, but one utility manager pointed out that a crew recently came across one in the ground, still carrying water.

The article noted that City official estimate it will cost between $4.5 to $5.0 billion to upgrade and repair the City’s water piping and treatment systems.

Maryland Retains AAA Bond Rating

July 10, 2014

As reported by the Baltimore Sun, the rating agencies reaffirmed Maryland’s AAA bond rating as it prepares to sell $800 million in bonds throughout July.  From the article:

The rating agencies — Standard & Poor’s, Fitch and Moody’s — pointed to Maryland’s high income, low unemployment and willingness to both cut budgets and raise taxes during tight financial times as some of the factors behind the bond rating.

Maryland has received a AAA bond rating from all three rating agencies for more than two decades.

Opinion Piece – Tax Sales Provide Revenue, Short Change Communities

July 10, 2014

In an opinion piece for the Baltimore Sun, Robin Jacobs, a staff attorney for the Community Law Center, argues that while the tax sale process provides much-needed revenue for local governments, it “exacerbates the adverse effects already felt by communities long struggling with vacant properties or ravaged by recent mortgage foreclosures.”

From the piece,

If the bidder realizes there’s no value to the property at some point in the tax foreclosure process, he may simply walk away, refusing to record a deed, leaving the title to the property clouded and in limbo. Anyone who subsequently wishes to purchase the property must clear the title, a potentially arduous and expensive process.

If no one bids on the property and the local municipality does not foreclose on it, the property simply sits until it cycles back into the tax sale, often after acquiring even more liens.

As the liens pile up, and the title becomes tangled, it becomes more and more difficult for reinvestment to take place. A home may become so far underwater that no rational developer or buyer would dream of diving into the depths of debt to save it. Community gardeners may take interest in creating a green space on the site of these vacant properties, but ownership remains out of reach if it takes thousands or even millions to fund their flowers.

Instead of clearing title, promoting reinvestment and furthering productive reuse, the speculation in the tax sale system perpetuates a vicious cycle of vacancy and abandonment. These vacant, abandoned properties become harbingers of crime, fire, trash and further disinvestment.

To address these issues, the Community Law Center has joined with the Baltimore Homeownership Preservation Coalition to convene a work group to study the process and improve the system.

We are looking at innovations that ensure revenue collection while also protecting both homeowners and neighborhoods. Our goals include making the system simpler and more compassionate, transparent, efficient and effective.

Ms. Jacobs chairs the Tax Sale Foreclosure Committee of the Baltimore Homeownership Preservation Coalition.

Congress Considering Legislation To Allocate $300 Million For Social Impact Bonds

July 8, 2014

As reported by Forbes, a bi-partisan bill, the Social Impact Bond Act, was recently introduced in the House of Representatives by Reps. Todd Young (R – Indiana) and John Delaney (D – Maryland) aimed at addressing difficult social programs. The bill would also require a one-time $300 million appropriation to pay for the positive outcomes of programs funded through this mechanism and to fund feasibility studies and evaluations of Social Impact Bond projects.

From the article:

Also known as Pay for Success, Social Impact Bonds are all about public-private partnerships and measurable outcomes. They’re a way for investors to work with governments and nongovernmental organizations or other service providers to address seemingly intractable problems, from child abuse to  maternal health, among low-income or vulnerable populations.  Whatever the problem, the outcomes must be measurable.

If the project reaches its goal as determined by a third-party evaluator, the government pays back donors with a small profit. If those objectives aren’t reached, there’s no return.

If enacted, this new program is envisioned to work in the following manner:

…to receive federal funding state or local governments would need to identify a social problem they hope to address that would have positive social outcomes and federal savings. Then they would submit a Social Impact Bond feasibility study to the Department of the Treasury, which would consult with a new entity called the Federal Interagency Council on Social Impact Bonds  and the head of any pertinent federal agencies. Treasury would only pay those local governments if a third-party evaluator determined the project had achieved previously agreed upon outcomes.

To learn more about social impact bonds and other innovative approaches for funding and financing projects and programs attend the MACo Summer Conference session “Doubling Your Dollars and Outcomes – Innovative Approaches for Funding and Financing Projects.”  This general session will be held in the Ocean City Convention on Friday, August 15 at 10:45 am.

Learn more about MACo’s 2014 Summer Conference:

Contact Meetings & Events Director Virginia White with questions about Summer Conference.

Survey Examines State Capital/Infrastructure Funding Approaches

June 12, 2014

A May 29 Governing article reported on recent survey by the National Association of State Budget Officers (NASBO) that examined how states approached their capital/infrastructure budgets.  How a state approaches its capital budget can influence how much local governments receive for needed infrastructure projects.   From the article:

[NASBO] found that,

  • There is not a uniform definition for what qualifies as a capital project and what can be included in the capital budget. For example, 29 states include information technology projects in their capital plans.
  • 19 states do not include transportation projects in their capital plans, mainly because those projects are funded separately using dedicated revenues from sources such as the gas tax.
  • Last fiscal year, 53 percent of state spending on transportation came from dedicated revenue streams, such as the gas tax. The second largest source of transportation money for states was federal money, which accounted for 33 percent of the spending.
  • More than half of states (26) use general funds to help pay for capital projects for higher education.
  • 33 states use a centralized agency to manage capital projects. Agency tasks often include estimating costs, scheduling projects and writing budget requests.
  • 37 states include inflation when calculating the cost of capital projects.
  • State constitutions, laws and other policies limit the amount of general obligation debt states can issue in 38 states. But states vary considerably on how much they rely on debt. Alaska, Iowa, Missouri, Nebraska and North Dakota rely especially heavily on using cash on hand to pay for their capital projects.

Capital Budgeting in the States (NASBO, Spring 2014)


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