Conduit Street

The Office of the Comptroller released its detail of the January 2012 distribution of local income taxes.  According to the electronic message, the January distribution totals $63.7 million, a 9.5% decline from FY 2011.  This distribution includes the additional filings distribution for tax year 2010 and the interest/penalty distribution for the first half of fiscal year 2012.  From the electronic message:

The additional filings distribution, a reconciling distribution accounting for all tax year 2010 returns posted between November 4 and December 31, 2011, is $42.3 million, a 20% decline from last year.

As with all distributions dealing with small numbers of returns, this distribution can be volatile.  In fact, the number of returns covered by this distribution declined almost 30% even though for the full tax year the number of returns increased 1.4%.

This distribution is the last tax year 2010 distribution; any remaining revenue from tax year 2010 activity will be distributed through the delinquent distributions and, ultimately, the unallocated distribution
for tax year 2010.

Total local income tax liability increased 5.8% in 2010, the first growth in three years following a 2.8% decline in 2009 and a steep 8.4% decline in 2008 (Table 4).  Growth in personal income recovered from a 1.6% drop in 2009–the first ever–to 3.9% in 2010.  And unlike 2008 and 2009, which experienced capital gains declines of 63% and 36%, 2010 saw capital gains increase an estimated 50%, albeit from a much reduced base.

The Interest and penalty distribution increased by $21.4 million, an increase of 23% over 2011.

The growth is spurred in part by the recently-enacted requirement that outstanding tax liabilities be
addressed, whether through full payments or payment plans, before driver’s licenses and motor vehicle registrations may be renewed.

If you have any questions about the January 31 distribution, please contact Judith Oberist of the Revenue Administration Division at (410)260-7606.

During the Maryland General Assembly, the Maryland Association of Counties (MACo) often calls upon its members to speak with a legislator regarding a  particular bill.   The Buddy System is MACo’s grassroots effort  to match county elected officials with Maryland Senators and Delegates to increase communication about legislation impacting county government.

During Session, Buddy Alerts are sent via email when a vote on a specific bill is crucial. The alert will provide a brief overview of the legislation, MACo’s position, and a some quick talking points.  MACo encourages elected officials to sign up to participate in this effort by selecting  Delegate(s)/Senator(s) from the lists below. Prior to selecting your “buddies” take into consideration those with whom you have the best rapport and feel most comfortable conveying a position on a bill.

Please send buddy requests to Emily Hollis at ehollis@mdcounties.org.

2012 Maryland State Senators

2012 Maryland State Delegates

Howard County Executive Ken Ulman announced the launch of  the Volunteer Income Tax Assistance (VITA) site, a pilot program that offers free tax assistance preparation and electronic filing to most taxpayers who earned up to $49,000 in 2011. VITA will operate out of the North Laurel Community Center from January 18 through April 14.

“Through the opening of this pilot site, we take another step forward to making and keeping all Howard County residents self sufficient,” said County Executive Ulman. “Working families who might otherwise pay hundreds of dollars for tax preparation and electronic filing can now use those funds to pay bills, weatherize their homes or save for their futures.”

For more information on the program visit: www.howardcountymd.gov/VITA.htm.

Trying to stay up-to-date on Maryland county news?  Follow MACo on Twitter!  Throughout the 2012 Session, MACo staff will be tweeting about committee and organizational meetings, general news updates on local county government, and staff updates.  Follow MACo through our Twitter handle, @ConduitStreet.

Also, when using Twitter, a hashtag (#) in front of a word allows tweets involving the hashtag code to be tracked in one cohesive thread.  So, if you’re looking for county government news, you can go to www.Twitter.com, search  #mdcountynews and see what everyone is saying! You can also search this hashtag code to get answers and updates from MACo staff.

MACo’s Legislative Tracking Database is your “one-stop-shop” for legislative information of importance to Maryland’s counties. From this page, you will be able to access all bills identified by MACo as having an effect on local governments by policy area, position, and staff assignment. You can also access key reports produced by MACo during the session to assist its Legislative Committee with taking positions on bills.

MACo Affiliates can now access bills through this system. From the Legislative Overview Page, just click on the policy area of interest for a list of bills directly impacting the affiliate.

MACo Legislative Tracking Database

County budget and finance officers met on January 9, 2012 to hear from the Director of the Bureau of Revenue Estimates David Roose, and State Department of Assessment and Taxation Director Robert Young, regarding revenue and assessable base estimates for FY 2013.  The manager of the Revenue Administration Division, George Freyman, also attended the meeting to discuss the income tax formula distribution and its effect on future distributions.

Revenue Estimates and Income Tax Formula Distribution

Mr. Roose provided  revenue estimates for FY 2012 and 2013 as of December 2011.  The State’s General Fund is expected to grow by 3.8% in FY 2012, dropping to 2.6% in FY 2013.  He said that the State will continue along at a low growth rate for the next few years.

Mr. Roose also provided information on employment growth and individual income tax revenue.  This prompted discussion on the income tax distribution formula and why the distribution was larger than usual in November 2011.

The percentages used in the formula are reset every year for the November distribution. This is done by seeing what the actual amount collected of the  total was,  based on the previous year’s tax liability using actual  returns received by November. This process works well when there is little change in the percentages used from year to year. However, the last few years have been very volatile and the formula percentages have changed quite a bit.  These formula changes have created an overstating of revenues which could result in a dramatic reduction in the summer of 2012 and a resetting of the formula a year from now that could cause revenue shortfalls if counties are not careful.

It is important to realize that this increase in income tax revenues and the resulting surplus it will generate is not an economically driven surplus, but rather a formula driven surplus. If counties were to use the revenue collected in FY 2012 as a base and project increases above that level for FY 2013, they we could find themselves with a severe revenue shortfall in FY 2013 and 2014.

Assessable Base Estimates

Mr. Young provided a series of tables showing the estimated taxable assessable base at the county level for FY 2012 through 2014.  The estimated real property assessable base drops from FY 2012 to 2013, but then stabilizes in FY 2014.  This same trend occurs at the State level.

Mr. Young also provided information on recent assessment notices .  As previously posted on Conduit Street, the grouping of residential properties recently assessed, declined in value by 17%.

Lastly, Mr. Young discussed outreach efforts to ensure homeowners complete the Homestead Tax Credit application prior to the December 31, 2012 deadline.

According to a recent press release from the State Department of Assessments and Taxation, assessment notices mailed to homeowners on December 27, 2011 reflect another large decrease in residential property values. These properties was last assessed in 2008.

Over the past three years, residential property values in this group have experienced a decline in value with 91% of them decreasing. On average, the residential values in this group being reassessed decreased by 17%.

This is the third year in a row residential property values have declined.  The group of homes that were assessed in 2010 dropped an average of 22% in value, and those assessed in 2009 dropped by 20%.

A previous blog posts points out that growth in property tax revenues is pretty much stagnet and that State property tax revenues are projected to decline for the next years and then remain flat.  All of this indicates that counties have a few more tough years ahead.  Counties are already projecting to bring in less property tax revenue in FY 2012 than they did in FY 2011.