DLS Opposes Shift of Property Valuation Cost to Counties

In its budget analysis of the Department of Assessments and Taxation, to be heard as part of the House Appropriations budget hearings today, the Department of Legislative Services (DLS) describes the  proposed shift in the Governor’s budget of 90% of the costs associated with the activities performed by the Real Property Valuation, Business Valuation, and Office of Information Technology (IT) programs to the counties.  The analysis includes a county breakdown of these costs. Consistent with its recommendations when a similar proposal was offered in 2009, the Department has recommended that the General Assembly reject this cost shift.

From the DLS description:

The Budget Reconciliation and Financing Act of 2011 proposes to shift a portion of the costs associated with the activities performed by the Real Property Valuation, Business Valuation, and Office of Information Technology (IT) programs to the counties. The cost shift will result in an estimated general fund savings of $33.9 million (excluding the AAVS funding budgeted within the Major Information Technology Development Project Fund (MITDPF)). The cost shift allows the department to use special funds received from the counties in lieu of general funds for expenditures associated with SDAT’s Real Property, Business Valuation, and IT programs. This action shifts 90% of the programs’ costs to the local jurisdictions based on the premise that on average, 90% of property tax revenues for which the department conducts the assessment accrue to the local jurisdictions. Additionally, local jurisdictions benefit from the department’s IT systems, which are primarily aligned with the department’s revenue collection function. It  should be noted that $943,000 of the fiscal 2012 allowance for AAVS, which is currently budgeted within the MITDPF, will be allocated to the local jurisdictions, thereby, bringing the total amount of the proposed reduction to $34.8 million.

It should also be noted that Chapter 487 of 2009 (Budget Reconciliation and Financing Act of 2009) included a similar proposal to shift a portion of the costs associated with the activities of the aforementioned programs to the counties. Ultimately, the proposal was rejected by the General Assembly due to concern regarding the impartiality of the assessment process.

In this year’s budget analysis, page 18 offers the DLS recommendation to reject this cost shift. The three parallel amendments (striking contingent reductions in the budget bill itself) on that page would restore State general funds as the source for these operations, rather than the special funds arising from county invoicing.

In 2009, MACo argued against the shift of these costs, with testimony on HB 101 (that year’s BRFA bill) detailing some of the history behind the current system:

Assessment Function Shift – In HB 101, one of the cost-saving measures proposed is to assign counties most of the costs of the State Department of Assessments and Taxation (SDAT) function of assessing property values. MACo urges that the Committee reject this change, which undoes decades of good policy.

This good policy was implemented beginning in the late 1960’s. Before then each county had its own assessment office, which was funded and controlled by that county. The State made a conscious policy decision that the assessment function and its funding should be shifted to the State to assure clear separation between assessments and the local government beneficiary of the resulting property valuation. This structure furthers citizen confidence in a function that citizens inherently view with suspicion.

In many states, having the level of government that yields its primary revenues from property tax also govern the assessment function has led to potential improprieties. Other states look to Maryland as a model for the ideal administration of the property assessment function – it would be inappropriate to reverse decades of good policy due to a temporarily bad budget.

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