Casino Revenue Shortfall and Police Overtime Create Baltimore City Budget Deficit

December 9, 2014

Although property tax revenues are up, a provision in Baltimore City’s charter which limits how surplus funds can be spent, has created a deficit in the City’s budget. As reported by the Baltimore Business Journal,

The city’s budget office expects $32.4 million more in property tax revenue than originally predicted for the current fiscal 2015 year. But the city charter says a surplus from property tax revenue cannot be used to close deficits. Now officials will have to find another way to make up the projected $14.8 million deficit that’s being created in part by police overtime spending and disappointing returns from the Horseshoe Casino.

Based on the casino’s revenue projections from a year ago, the City was anticipating $14.6 million in ground lease payments.

But now, city budget director Andrew Kleine said the city is only counting on collecting the $8 million minimum it agreed to in annual ground lease payments determined through a percentage of revenue generated at the South Baltimore casino. Of that, $7.2 million will go toward property tax relief.

The City is also exploring ways to minimize the amount paid in police overtime.

One way the city could help close the deficit includes a new Baltimore Police scheduling system expected to cut overtime costs, Klein said. Additionally, indicators point to better-than-expected income tax revenues by year’s end, he said.

Local Income Tax Continues to Show Weakness

December 2, 2014

The Office of the Comptroller released its detail of the November distribution of local income taxes.  According to the electronic message, “The November distribution totals $1.272 billion, a decrease of 6% over last year’s 2013 distribution.” This distribution is composed of the following components:

  • 2014 third quarter withholding and estimated payments; and
  • the November adjusted final distribution (a reconciling distribution for tax year 2013).

The adjusted final distribution, which totals $334.4 million, a 27.8% decline from last year, is responsible for the decrease in local income tax revenues.

This distribution accounts for the returns filed through the October 15 filing extension; these returns typically show disproportionately high levels of income. As is typical with reconciling distributions, growth varies widely across the counties. Atypical is the magnitude of the decline, particularly that of Montgomery which accounts for 53% of the decrease.

The Comptroller’s Office attributes this decline to the fiscal cliff and indicates that it will continue to play a role.

If you have any questions about the November 25 distribution, please contact Jim Pasko of the Revenue Administration Division at (410)
260-7521 or Jason Brohawn at (410) 260-6159.

A history of the local income tax distributions to local governments can be found on the Office of the Comptroller’s website.

Legislative Handbook Series – An Indispensable Reference

November 28, 2014

The Department of Legislative Services has released its quadrennial Legislative Handbook Series, a deep and useful reference series that encapsulates nearly every issue of government at the state and local level. The series may be downloaded or viewed online for free at the links below:

Legislative Handbook Series:

Vol 1 – Legislators Handbook
Vol 2 – Government Services
Vol 3 – Revenue Structure
Vol 4 – Budget Process
Vol 5 – Personnel, Pensions & Procurement
Vol 6 – Local Government
Vol 7 – Business Regulation
Vol 8 – Criminal/Juvenile Justice Process
Vol 9 – Education

Washington Area Needs to Diversify to Offset Federal Cut Backs

November 25, 2014

Federal sequestration and the Washington area’s reliance on federal spending has created significant shortfalls in the budgets of state and local governments in the surrounding area.   As reported by the Washington Post,

George Mason University’s Center for Regional Analysis estimates that the federal government spent $13.4 billion less in the Washington area in 2013 than in 2010. That decrease, economists say, contributed to the following: Virginia is struggling to fill a projected $2.4 billion revenue gap in its state budget over the next three years, even though the national economy is improving; Maryland faces a $600 million budget deficit next fiscal year and nearly $300 million for the current fiscal year; the District last week announced a possible revenue shortfall of $163 million for fiscal 2016.

This funding shift has led business leaders to contact elected officials urging measures to diversify the area’s economy.

The shift has helped drive down the region’s gross regional product, an indicator of an economy’s health, by nearly $243 million since last year.

Without a fundamental shift in the region’s economic base, area leaders say, future declines in federal spending will result in more shortfall announcements and more hasty budget revisions.

Counties in the area are also feeling the effects.

“A lot of people have talked about this being the new normal,” said Susan Datta, budget director for Fairfax County in Northern Virginia, which will announce Tuesday its seventh consecutive budget deficit since the 2008 recession. “We anticipate it’s going to be a very, very difficult budget year.”

Jennifer Hughes, director of the Office of Management and Budget in Maryland’s Montgomery County, struck a similarly dark tone after the county learned that the state’s November distribution of income tax revenue was $96 million short of projections.

Prince George’s County is facing a $59 million deficit that threatens its bond rating and prompted officials to cancel recruitment for police and firefighters, slash funding for various programs and reduce overtime hours for emergency workers.

Montgomery County to Hold the Line on Spending

November 25, 2014

As reported by the Washington Post, lower than expected revenues will force Montgomery County officials to limit spending in the current and upcoming fiscal year.

The state’s November distribution of income tax revenue to the county was $96 million below the $443 million projection. The November payment from the state is usually one of the largest, and is used to help forecast the county’s revenue picture for the next year.

In a memo Friday to County Council President Craig Rice, Leggett said the revenue report is a signal that officials need to hold the line on new spending.

It is too early to determine what measures may be put in place to offset the lower than anticipated revenues.

In an interview Friday, Finance Director Joseph Beach said no decision will be made until officials can look at “total revenue picture,” which will be available in early December.

Counties Propose Revisiting Taxes and Fees Following Hogan Victory

November 17, 2014

Many counties and Baltimore City are revisiting their tax and fee structures following Larry Hogan’s victory in the gubernatorial election. As reported by the Baltimore Sun,

In the aftermath of Republican Larry Hogan’s victory in the governor’s race on an anti-tax message, fiscally conservative politicians from both parties see a carpe diem moment. With their colleagues who champion increased government services reeling, small-government advocates are pressing to cut taxes and fees.

Some counties are looking specifically at property taxes and stormwater management fees.  Baltimore City’s Mayor, Stephanie Rawlings-Blake, recently appointed a task force to study whether the city’s taxes and fees could be reduced.

In Anne Arundel, Republican Del. Steve Schuh, who was elected county executive, said he plans a 3-cent cut to the property tax. Anne Arundel’s property tax rate is $0.943 per $100 of assessed value.

State Sen. Barry Glassman, the Republican elected as Harford County executive, said he has legislation in the works to repeal the county’s stormwater management fee.

“I’m going to introduce a repeal of the rain tax,” Glassman said, adding that he plans to fund cleanup efforts using other revenue available through the county’s capital budget. “We’re still developing how we can do it, but it’s a no-brainer for me.”

In Howard, state Sen. Allan H. Kittleman, a Republican elected county executive, said he wants to work with the County Council to “reduce or repeal” Howard’s stormwater fee. The county charges $15 per 500 square feet of impervious surface.

In Baltimore, Rawlings-Blake said she’s looking for places to cut. The mayor appointed a task force last week to study whether some of the city’s many taxes and fees can be reduced or changed. The 20-member Baltimore Tax Policy Study Focus Group includes developers, real estate lawyers and leaders of business associations.

“I’ve asked the group to put particular emphasis on our property tax rate,” she said. “They will present my administration with recommendations for areas where we can move forward with possible additional tax relief.”

Montgomery County Council Doubles Senior Property Tax Credit

November 14, 2014

It is estimated that by 2030, 1 in every 5 Americans will be over 65 years of age.  In Maryland’s Montgomery County, the County Council recently unanimously passed legislation sponsored by Councilmember Hans Riemer that doubles the senior property tax credit. According to Councilmember Riemer,

Seniors often have fixed incomes and rising expenses. About 9% of our seniors live in poverty. For some, property taxes are a significant burden on their small incomes.

Specifically, this bill will reduce the property tax liability for seniors whose property tax payments represent a large portion of their household’s income. In 2012, there were 3,063 recipients and the average recipient received $179.15 from the tax credit. Under this legislation, the average tax credit will double to $358.30. The additional tax credit will begin for the 2015 tax year, starting on or after July 1, 2015. The age of eligibility will also change from 70 to 65.

Learn more about this important tax credit, and find out how to qualify here.

To join a discussion of additional ways that all of Maryland’s counties can sustain meaningful programs for older adults in their communities, come to MACo’s educational session, Will the Boomers Bust Us?: A Reality Check, sponsored by MACo’s Aging Affiliate at MACo Winter Conference.  This session will address how Area Agencies on Aging can continue to support older adults aging-in-place in Maryland with an eye towards strategic planning for the sustainability of current programs.  From the description,

Maryland began shifting from grant-based funding for aging programs to a fee-for-services model in 2012 with the Home and Community Based Waiver for Older Adults. Currently, we are billing for the Community Options Waiver and not covering the costs. Aging services such as Maryland Access Point (MAP) and others are moving to fee-for-service as well. The transition at the state level moves forward despite the fact that revenue estimates for fee-based services do not come close to matching current grant-funding levels.

Learn more about MACo’s Winter Conference:

Questions? Contact Meetings & Events Director Virginia White.


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