MACo Offers Amendments to Better Tailor Economic Development Program

Today, February 18, Andrea Mansfield, MACo’s Legislative Director, testified before the Senate Budget and Taxation Committee in support of SB 196, with amendments. This bill would establish the Rural Economic Development Program to spur economic activity in the rural parts of the state. The bill also changes the eligibility criteria for a county to participate in the One Maryland Tax Credit Program.

This new program would provide both state and local tax exemptions and offsets in seventeen counties over a ten-year time frame as an incentive for businesses to locate in those jurisdictions. Another component of the program creates an infrastructure fund to assist eight rural counties with building infrastructure necessary to encourage businesses to locate in these areas.

From MACo’s written testimony:

MACo believes this program is well intentioned, but is concerned that some jurisdictions are prohibited from participating, the job creation requirement is too rigorous for rural areas, and that the local property tax exemptions are mandated. In addition, it is concerned that the program could result in businesses relocating amongst regions of the state.

To address these concerns, MACo suggested amendments to do the following:

  • Expand program participation to all 24 jurisdictions
  • Authorize local jurisdictions to determine the amount and duration of the property tax credit
  • Establish job creation metrics suited for rural and urban parts of the state
  • Limit the tax incentives to businesses newly moving into or expanding within the state

For more on MACo’s 2015 Legislation, go to the Legislative Database.

MACo Opposes Mandated Cap on Personal Property Tax Rates

Today, February 18, Andrea Mansfield, MACo’s Legislative Director, testified in opposition to  HB259, Personal Property Tax- Maximum Rate- Small Business, before the House Ways and Means Committee.

This bill would mandate a five-year cap on the county personal property tax rate imposed on many small businesses. The mandated cap would limit county taxing authority affecting county revenues and arbitrarily set a tax rate that would apply only to certain types of businesses.

As stated in MACo’s written testimony:

The total assessed value of personal property is $23.2 billion, which generates $585 million in county revenues. While it’s difficult to determine the revenue loss associated with HB 259, State fiscal constraints and economic realities make it difficult for counties to absorb additional losses, especially while counties face increasing pressure to satisfy State-mandated education funding requirements. MACo would prefer approaches that give counties flexibility in setting tax rates and managing their bottom line.

For more on MACo’s 2015 legislation, visit the Legislative Database.

Legislation Would “Level the Playing Field” On Hotel Taxes

SB 190, sponsored by Senator Richard Madaleno, heard before the Senate Budget and Taxation Committee on February 11 would “level the field” when its comes to sales taxes remitted on hotel rooms booked through online travel companies (OTCs). As reported by,

Under current Maryland Law, the actual room rate charged by the hotel is taxed at 6%. Senate Bill 190 would clarify the definition of “taxable price” and apply it to online travel companies.

According to the legislation’s fiscal note, in many instances online travel companies can purchase bulk hotel room rentals for a reduced rate from a hotel, which they in turn rent to customers. The purchaser of the room rental is usually charged the same rate as the person would be if the hotel room rental was purchased directly from the hotel.

The issue that has arisen in recent years is the definition of taxable price that is the basis of state and local sales and use taxes and hotel taxes. Online travel services have typically been remitting these taxes based on the reduced rate that they pay for the hotel rooms — not the full price they charge to hotel guests.

MACo testified at the hearing stating it would support amendments to extend this same principle to any local hotel tax.  Doing so, would establish fair and equitable tax treatment of hotel rooms for both state and local taxation purposes.

According to the article,

The Maryland comptroller’s office has been arguing in court that these taxes should be collected on the total room rate paid by the end user. That is the basis on which the taxes would have been been imposed if a customer rented the hotel room directly from the hotel.

In Maryland, Baltimore City and Baltimore, Montgomery, and Worcester counties have sued the online bookers over the definition of taxable price as it applies to their local hotel taxes. These jurisdictions have reached settlement agreements with the various OTCs regarding unpaid taxes.

Steve Shur, president of the Travel Technology Association, disagreed.

 …this bill would create a new sales tax on service fees,  With the new sales tax, Shur said, the added cost would encourage travel sites to steer consumers to other destinations that do not charge the sites, which in turn would hurt Maryland’s tourism economy.

Proposed Budget Language Limits Flexibility With Transportation Funds

The Department of Legislative Services has recommended budget language that would restrict funds for local transportation aid and transit capital projects for those purposes unless otherwise specified in the budget or a supplemental appropriation. The rationale for this recommendation is explained in the Maryland Department of Transportation Fiscal 2016 Budget Overview.

The TTF (Transportation Trust Fund) forecast and the CTP (Consolidated Transportation Program) submitted as required with the Maryland operating budget were developed by the previous Administration. With submission deadlines leaving little time for meaningful changes to be made, the new Administration allowed MDOT to submit the documents “as is.” Consequently, the budget and the capital program about which the budget committees and subsequently the General Assembly will be making decisions do not reflect the new Administration’s priorities, which could have major effects on how funds are expended and which capital projects continue to move ahead. Policy positions stated during the gubernatorial campaign – restoration of HUR funding to local governments, the level and timing of spending on mass transit (specifically the Red and Purple Lines), etc., – could have a significant impact on transportation spending if implemented during fiscal 2016.

The Department raised concerns with this recommended language,

These are important issues for which the Administration has had limited time to analyze. In order to address the needs of the citizens, the Department requires the flexibility to actively and responsibly manage its resources.

In addition to recommending the budget language to restrict the funds, the Department was also asked to brief the budget committees “on the intended manner and timing of notifications to the legislature and the public of changes in policies or in the capital program which will have significant fiscal or budgetary impacts.”

The Department responded,

The new administration will be examining the current transportation program and may change some aspects of the Consolidated Transportation Program (CTP). The largest potential changes and policy decisions will be made public as part of ongoing budget discussions throughout the 2015 General Assembly Session and as part of the draft CTP development process this summer.

The Department’s full response can be found here.

Administration Introduces Legislation to Restore Local Share of Highway User Revenues

Governor Hogan, as a part of his legislative package, has introduced legislation (HB 484 / SB 591)  to restore local highway user revenues back to their historic 30% share over the next eight fiscal years.

Since 2010, the former $555 million budget given to local jurisdictions for local transportation funding, has been drastically cut back to $167 million. Prior to Fiscal Year 2010 local governments received 30% of highway user revenues, now funds received have dropped to 9.6%. The cumulative loss of roadway investment across our state is approximately $2.1 billion in the past six years.

Senator Roger Manno has also introduced legislation (SB 181)  to restore local highway user revenues, however his bill would do so over four years. A panel of local officials and a MACo representative testified in support of this legislation in the Senate Budget and Taxation Committee earlier today.

Restoring these funds is MACo’s top priority for the 2015 legislative session.


MACo Opposes State Tax Breaks On County Dime

This afternoon, February 11, MACo Legislative Director Andrea Mansfield presented testimony opposing Income Tax Subtraction Modification – Retirement Income of Law Enforcement, Correctional Officer, Fire, Rescue, and Emergency Services Personnel, SB115. This is one of numerous expected this session to exempt additional retirement income, all of which will have significant revenue effects on the State and local governments.

The written testimony states:

State fiscal decisions compound these issues. A year after formula funding was restored and additional funding provided for some programs, the Governor’s proposed FY 2016 budget seeks to roll back virtually all of these increases, sending distributions in most areas of direct aid for county governments back toward the deepest levels of the “great recession.” Reductions in education funding will also place enormous increased pressure on the counties to provide dollars for public schools. Legislation that further reduces county revenues would make it substantially more difficult for counties to manage their budgets to provide needed services.

All of MACo’s 2015 Legislation can be found in the Legislative Database.

MACo Supports Stabilizing Support for State-Owned Lands

MACo presented testimony today in support of SB 134, a bill to stabilize state funding to counties hosting substantial state-owned property such as State Parks. This is different from the payments that counties currently receive, which is a portion of revenues generated from the State forest and parks. Those funds have historically been “raided” by state budget reconciliation plans (and are targeted for a $2.5 million reduction for FY 2016), and would (under SB 134) be eliminated.

The written testimony states:

MACo believes SB 134 will serve as an incentive to counties to preserve their State forests, parks and wildlife management areas. As State lands or designated wildlife areas, these properties are exempt from the local property tax, which is the counties’ top revenue source. These revenues fund a large portion of county expenditures from which these lands benefit, including law enforcement, emergency management services, stormwater infrastructure, and roadways. Providing services to these areas without revenues for this specific purpose draws funds away from other parts of the county budget.

SB 134 would provide a consistent revenue stream to offset losses in property tax revenues and fund the public services provided in these areas. For this reason, MACo would urge a FAVORABLE report on SB 134.

For more on MACo’s 2015 legislation, visit the legislative database.

MACo: Apply State and Local Hotel Taxes Fairly

Today, February 11, MACo testified to seek amendments to SB190, which would impose the State Sales and Use Tax on the full price paid to an online travel website for the cost of a hotel room – under current law some online retailers are collecting only on a lesser “wholesale” price they provide to the hotel directly. MACo sought amendments to extend the same principle to any local hotel tax. Several conventional hotel chains also supported the bill, citing inequities in tax treatment across purchase venues.

The written testimony explains:

Hotel taxes are a vital revenue source for counties. While some counties may use this source as a General Fund revenue, most use these funds to promote tourism to improve the local economy. A few counties may use these revenues to pay debt service for convention centers or sports facilities.

For more on MACo’s 2015 legislation, visit the Legislative Database.

State Will Evaluate Local Income Tax Reserve Account

In response to a budget analysis by the Department of Legislative Services (DLS), the Department of Budget and Management (DBM) has indicated that they are “evaluating the impact and implications of prior transfers and non-repayments from the Local Income Tax Reserve Account.”  This issue was raised during a budget hearing before the House Appropriations Committee on the State Reserve Fund.

To balance the State budget in two different fiscal years, a total of $916.8 million has been transferred out of the Local Income Tax Reserve Account to either the General Fund or the Education Trust Fund. In subsequent years, language in the Budget Reconciliation and Financing Act repealed the requirement that the State and local governments repay $716.8 million of these funds resulting in an unfunded liability in the Account.

From the budget analysis,

The State collects income taxes for local jurisdictions and makes payments to the counties and Baltimore City from this account. According to GAAP, the State is supposed to maintain a sufficient fund balance to pay future refunds, in case the income tax is no longer collected. If the account is insufficiently capitalized at the end of a fiscal year, the State is required to report the underfunding as an unfunded liability in the Comprehensive Annual Financial Report (CAFR).

As long as there is not a plan to replenish the funds that were transferred in fiscal 2011, the State will continue to have this unfunded liability. The concern is that the account has not yet been reimbursed and there is no plan to fully reimburse the account. This creates a GAAP balance that the State is disclosing in the annual CAFR and also will limit the State flexibility during the next recession. The Secretary should brief the committees on plans, if any, to reduce the unfunded liability in the Local Income Tax Reserve Account beyond the $100 million repayment proposed in the budget.

In response to DLS’s analysis, DBM responded that it is evaluating the account.

As noted in the analysis, Governor Hogan’s FY 2016 budget plan repays the proposed FY 2015 transfer from the Local Income Tax Reserve Account. The Administration urges the General Assembly to honor that repayment commitment. Beyond this planned repayment, the Administration is evaluating the impact and implications of prior transfers and non-repayments from the Local Income Tax Reserve Account. Any recommendations regarding the unfunded liability in the Account are forthcoming.

Sun’s Data Desk Profiles Hogan Tax Cut Proposals

The Baltimore Sun‘s recently launched “Data Desk” now features an interactive and graphically-driven look at the tax proposals offered by Governor Hogan during his State of the State address on February 4.

Visit the Sun’s Data Desk coverage of the tax proposals.

The Sun lists MACo as a “key stakeholder” on one of the proposals in particular, which seeks to reduce personal property taxes on small businesses, and substitute state assistance to offset the lost local tax revenues:

The Maryland Association of Counties and local governments may be wary of supporting a cut that directly reduces a reliable revenue stream and replaces it with a promise of state help.

The Governor’s legislation for these proposals (and others mentioned during the speech) is expected to be formally introduced in the coming days.