Counties Defend Autonomy Over Local Tax Decisions

The Senate Budget and Taxation Committee heard testimony on SB 590, Small Business Personal Property Tax Relief Act of 2015, on March 10, 2015, in which Michael Sanderson, MACo Executive Director, testified in opposition. This bill depletes state revenues and reduces county personal property taxes, without any local action or input.

This would be done by mandating local governments to provide personal property tax exemptions for businesses with personal property of a total assessed value of $10,000 or less. Also, this bill would exempt these businesses from filing a personal property tax report and paying the annual filing fee (though the Administration suggested amendments during the bill hearing to remove this component, leaving only the local revenues in play). Counties believe that incentives and reductions in local tax rates or bases should be a local decision, and MACo resists proposals that automatically effect such changes across each county.

The written testimony states:

MACo believes this approach, and others like it, give counties flexibility in setting their rates to better tailor economic development strategies to attract businesses and provide funding for needed services, instead of setting an arbitrary mandate that would apply to a limited number of businesses.

 

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

Senate Committee Kills Homestead Property Tax Credit Application Repeal

The Senate Budget and Taxation Committee voted down SB 375, which would have repealed the application requirement for the Homestead Property Tax Credit. MACo opposed this legislation commenting that the application has improved the fairness of the program and ensures that only homeowners who reside in their homes receive the credit.  Until the application process was put in place, a substantial number of properties were enjoying this tax credit without actually qualifying under the law, such as rental properties or second homes.

From MACo’s written testimony,

MACo believes the General Assembly did the right thing by requiring the application. It has improved the administration of the program and provides a verification mechanism to ensure only eligible homeowners are receiving the credit. Abuse of the Homestead Credit is unfair to other taxpayers, as it depresses the tax base beyond the targeted intent of the policy.

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

 

 

Harford County to Award Tourism Grants With Hotel Tax Revenues

Harford County will begin collecting its hotel tax March 23. The tax is expected to bring in $2.75 million in revenue to be used for grants for tourism related activities. As reported in the Baltimore Sun,

Proceeds from the tax will be funneled to public and private nonprofit organizations committed to planning and implementing tourism-related activities.

The application period opened Monday and will end April 17. Grant awards will be made on a competitive basis, subject to the availability of funds, according to a county government announcement.

The Harford County Economic Development Advisory Board has designated a Tourism Activity Review Committee to allocate the revenue.

“I look forward to investing county revenue from the hotel lodging fee to support tourism-related activities and promote economic growth,” Harford County Executive Barry Glassman said in a statement. Glassman sponsored the lodging tax legislation, which set up the process to use the money for tourism-related grants.

MACo Supports Legislation to Restore Funding for Local Roads and Bridges

MACo Executive Director Michael Sanderson, joined by Allegany County Commissioner Bill Valentine, Anne Arundel County Council Member Jerry Walker, Prince George’s County Council Member Todd Turner, and MML Associate of Government Relations and Research Tom Curtin, testified in support of legislation to restore local transportation funding before the House Environment and Transportation Committee on March 6, 2015. The bills, HB 484, HB 837, HB 899, and HB 1003 would provide additional revenue for local roads and bridges by either phasing-in the previous distribution of highway user revenues or allowing a local share of transportation revenues generated through recent changes to motor fuel taxes.

“Transportation Funding Restoration” is MACo’s top priority for the 2015 Session. From MACo’s testimony on the bills,

For decades, local roadways were funded as one of the modes of transportation receiving 30% of Highway User Revenues (motor fuel tax and vehicle registration fees). The local share was slashed during the recession-driven budgets, and the former $555 million has been directly cut back to $167 million – with a mere $26 million to be shared among 23 county governments (that figure used to be $282 million). The cumulative loss of local roadway investment since Fiscal 2010 is approximately $2.1 billion. Simply put, no other component of the State budget has suffered reductions of this magnitude.

MACo feels strongly that it is now time for local roads and bridges to again play a more significant role in the State’s transportation funding plan and supports all efforts to restore funding this session.

MACo’s appreciates the support of Governor Hogan and Delegates Kramer, Parrott, and Vogt to restore these funds. To emphasize local transportation needs, Delegate Parrott prepared a presentation explaining how these funds are used, the need for a stable funding source, and the disparity in the current funding distribution based on road miles.

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

MACo and MML Push Creation of State and Local Advisory Council to SDAT

Representatives from MACo and MML testified during the State Department of Assessments and Taxation (SDAT) budget hearing before the House Appropriations Subcommittee on Public Safety and Administration this week to urge the Subcommittee to support the creation of a State and Local Advisory Council and the performance of a business process analysis of the Department. These actions were recommended by the 2014 Property Assessment Workgroup (AWG) established through the Budget Reconciliation and Financing Act of 2014 (SB 172) to examine issues related to the assessment process for real and personal property, tax credits, and tax exemptions.

From the joint MACo and MML statement:

Local governments and SDAT have a very unique relationship for property assessment purposes. Local governments rely on SDAT for accurate and timely property assessment information to process and send tax billings, and properly calculate tax credits. SDAT relies on local governments for information concerning building permits, property change of use information, property owner address changes and other information to accurately make adjustments to the tax rolls. This relationship emphasizes why the AWG and its recommendations are so important to ensuring a fair, equitable, and uniform system of property assessments for all taxpayers.

Local governments believe the Advisory Council would improve communication amongst state and local partners and provide a forum to discuss business process changes, the leveraging of technology with state and local partners to improve the assessment process, and other matters raised by the partners.

The business process analysis would examine how technology can be utilized to maximize efficiency and streamline operations in the performance of property assessments and other functions. The analysis could also recommend improvements to the transfer of data between SDAT and local governments.

SDAT Budget Analysis Document

MACo Opposes Mandated County Revenue Cuts

MACo Executive Director Michael Sanderson testified to the Senate Budget and Taxation Committee opposing SB 592, Income Tax- Subtraction Modification- Military Retirement Income, and SB 594, Income Tax Subtraction Modification – Law Enforcement, Fire, Rescue, and Emergency Services Personnel (Hometown Heroes Act) on March 4, 2015. These bills would expand or create income tax subtraction modifications for a variety of retirees; these subtraction modifications would impact state and county revenues. In fact, once fully phased in, both of these subtraction modifications could cost the counties close to $22 million annually.

In addition to the huge financial burden’s these proposed subtraction modification would cause, the fact that local governments were not consulted is extremely disconcerting and limits the county flexibility. As stated in the written testimony:

…MACo’s position on these and other similar proposals and its preference that State proposals affecting local revenue sources be enacted as a “local option.” This approach would give counties maximum flexibility to achieve local goals.
 

Mr. Sanderson also referenced the broad policy statement MACo adopted earlier this session, cting counties’ consistent views in support of local autonomy.

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

MACo Opposes Homestead Property Tax Credit-Application Requirement-Repeal

Michael Sanderson, MACo Executive Director, presented testimony to the House Ways and Means Committee, on March 4, 2015 opposing HB 996, Homestead Property Tax Credit-Application Requirement-Repeal. This bill repeals the application requirement for the Homestead Property Tax Credit program, which gives tax relief to homeowners by capping the amount of the annual assessment for property tax purposes. In 2007, an application process was created to establish a homeowner’s claim of a property as “owner occupied”. Since this application has been created, homeowners who receive the credit submit an application to continue to be a part of the homestead property tax credit.

The written testimony explains:

MACo believes the General Assembly did the right thing by requiring the application. It has improved the administration of the program and provides a verification mechanism to ensure only eligible homeowners are receiving the credit. Abuse of the Homestead Credit is unfair to other taxpayers, as it depresses the tax base beyond the targeted intent of the policy.

During the bill’s public hearing, Delegate Long (the bill’s sponsor) suggested he would support alternative means to reduce the potential burden and surprise of the application process. Mr. Sanderson responded, indicating comfort “as long as the core intent of the application process stays intact.”

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

MACo Opposes Statewide Mandated Tax Setoff Process

Michael Sanderson, MACo Executive Director, testified in opposition to HB 690, Property Tax Fairness Act of 2015 (Strengthening Maryland Municipalities), to the House Ways and Means Committee, on March 4, 2015. This bill would imposes a one-sided mandate on each county and municipal government to negotiate property tax setoffs to the complete satisfaction of both parties. HB 690 would overturn decades of state law, derived through local deliberation and each county’s delegation support, and place all counties into one strict law, making the tax setoff mandatory instead of optional.

MACo’s written testimony states:

Further, county governments engage in a wide range of in-kind services, grants, and other agreements that help serve municipal residents. These arrangements are not captured in any summary of tax setoffs, but represent material benefit to municipalities just the same. Under HB 690, many of these agreements and arrangements would surely be undermined as county resources were compromised.

During the public hearing, several Committee members raised questions about the statewide nature of the bill, rather than pursuing local legislation (as another bill heard the same day sought to do for Frederick County only).

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

Worcester County Facing Budget Revenue Shortfall

Worcester County officials are projecting sluggish revenue growth as Commissioners begin their annual budget process. As reported by The Dispatch,

Finance Officer Phil Thompson told the Worcester County Commissioners last Thursday that property tax revenue was still down and that the county’s budget stabilization funds were nearly depleted.

Thompson said Worcester County’s assessable tax base had decreased from more than $20 billion in FY 2009 to just under $15 billion in FY 2015.

Based on recent estimates, the assessable base will continue to decline in FY 2016, but increase to slightly more than $15 billion in FY 2017.

Property taxes, which amounted to $126 million in revenue in FY 2012, are expected to drop to $117.7 million in FY 2016. Income tax revenue has also shown a decline in recent years. Although the county received $13.1 million from income taxes in 2009, that revenue stream is expected to amount to just $12.4 million in FY 2016.

MACo Advocates for Local Flexibility in Personal Property Tax Application

MACo Legislative Director Andrea Mansfield testified before the House Ways and Means Committee on February 27 urging members to adopt approaches that would give counties greater flexibility in setting personal property tax rates not reduce county personal property tax revenue with no local input. HB 480, Small Business Personal Property Tax Relief Act of 2015 would provide a personal property tax exemption for businesses with personal property with a total value of  $10,000 or less. The bill also exempts businesses from filing a personal property tax report and paying the annual filing fee.

Although the bill would fully reimburse local governments for lost revenue in FY 2017, this reimbursement would be phased-out and local governments would be required to absorb the loss beginning in FY 2020. As Ms. Mansfield indicated, “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.”

MACo recently adopted a broad policy statement which seeks to clarify its general position on tax incentives and local decision-making. MACo’s preference is that proposals affecting local revenue sources be enacted as a “local option.” This approach would give counties maximum flexibility to achieve local goals.

As an example, Ms. Mansfield discussed legislation enacted two years ago to decouple personal property tax rates from the real property tax rate allowing counties to incentivize business investment using a deliberate approach rather than one that is lock-step with the more general real property tax rate. Ms. Mansfield stated, “this approach gives counties flexibility in setting their rates to better tailor economic development strategies to attract businesses and provide funding for needed services.

MACo’s written testimony can be found here. For more on MACo’s 2015 legislation, visit the Legislative Database.