Falling Assessments Shine Light on Constant Yield Mandate

Today’s Gazette discusses the constant yield tax rate process, and the curious requirement that local governments seeking to retain their current tax rates post public notice as a “Notice of tax Increase” in newspapers. From the article:

Harford County Executive David Craig is loathe to raise taxes, but he and other local government officials are particularly miffed about a state requirement that they publish notice of property tax increases even if rising assessments are to blame.

But in a new twist, plummeting real estate assessments could for the first time allow cash-strapped jurisdictions to raise tax rates without providing that notice. Most homeowners would not see a significant change to their tax bill, because the higher rate would be offset by the lower property assessment.

Since 1977, counties have been required to notify taxpayers and conduct a public hearing before setting a property tax rate higher than that which would render the same revenue as the year before, known as the “constant yield” rate.

Because property assessments typically grow in value, constant yield rates historically have been lower than the previous year’s actual tax rate. Often, counties will leave their property tax rate unchanged but have to give notice that they are proposing to “raise” taxes because assessments and projected revenue have increased.

The issue came up briefly during a recent House Appropriations Committee hearing, when Craig made plain his disdain for the requirement.

“I think it’s a rather ridiculous thing to do, especially the way it’s worded,” he said. “It implies to people that we are raising the tax rate.”

Further comments from the State Department of Assessments and Taxation detail the strange situation this law faces, as property assessments are now in steep decline. From the House Appropriations Committee (where the topic raised some conversation at a recent briefing), one legislative leader spoke on the subject:

Del. John L. Bohanan Jr. (D-Dist. 29B) of California, who sits on the Appropriations Committee, expressed concern that the required notices were misleading to taxpayers.

“It can be very confusing, especially when folks choose to demagogue the issue,” he said, in reference to those who use the ads as evidence that local officials are raising taxes.

Michael Sanderson

Executive Director Maryland Association of Counties

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