The Frederick County Council yesterday approved legislation authorizing the County to incur a line of credit of up to $100 million in order to ensure continuity of operations in the event that local revenue collections are delayed or otherwise adversely affected as a result of the COVID-19 pandemic.
Counties are making significant financial investments to address immediate public health and safety needs. At the same time, counties are experiencing massive and unprecedented declines in revenue as a result of the public health crisis.
The combined effect of these changes will likely undermine county revenue structures and support for education, public safety, roadway maintenance, and other essential services.
Frederick County’s additional borrowing capacity, which is backed by its full faith and credit, would provide flexibility to draw on funds to cover short-term working capital expenses — including payroll, debt service, and accounts payable — in the event of a worst-case scenario for local revenues.
As previously reported on Conduit Street, the Comptroller’s Office extended the due date for Maryland state individual and business income tax payments to July 15. No interest or penalty for late payments will be imposed if 2019 tax payments are made by July 15.
The extension, while beneficial for taxpayers, may create a cash shortfall for counties that will have to wait for the state to collect and remit local income tax revenue. Furthermore, counties are writing down revenue estimates for income transfer/recordation, admissions and amusements, and hotel tax revenues.
Should Frederick County take the line of credit, it would be applicable for 12 months and any interest charges would be considered eligible costs under the CARES Act. As previously reported on Conduit Street, the CARES Act included $150 billion in new federal funding targeting state and local governments.
Stay tuned to Conduit Street for more information.