The Local Revenue Task Force met Monday to review potential options for modernizing local revenue structures. Members examined existing taxing authority, previous legislative proposals, and several approaches that could give counties and municipalities more flexibility.
The Task Force to Modernize County and Municipal Revenue Structures met Monday to work through the mechanics behind Maryland’s local revenue system. The Department of Legislative Services (DLS) reviewed State aid, the State budget, existing local taxing authority, recent legislation, and several property tax options.
The State Department of Assessments and Taxation (SDAT) explained how it values property and what its current systems can support. The meeting covered progressive recordation and transfer taxes, commercial property rates, land value taxation, data centers, and municipal tax setoffs.
The State-Aid Headline Does Not Tell the County Budget Story
DLS reported that State aid to local governments rises from $9.43 billion in fiscal 2023 to $11.94 billion in fiscal 2027. Public school aid accounts for $1.91 billion of that increase, and retirement payments account for another $316.6 million.
Public schools and retirement payments account for nearly nine of every ten new dollars in the four-year comparison. The broader county and municipal category grows by $19.2 million in fiscal 2027, and that category also includes municipal shares of police aid, Highway User Revenues, and fire aid.
The total measures State appropriations, not flexible county revenue. School formulas, local matching requirements, and other mandates direct much of the money before it reaches a local budget.
Counties also provide the local funding required to operate Maryland’s public school systems, a responsibility municipalities generally do not share. As education consumes a growing share of both State and county budgets, increases in State school aid cannot be viewed separately from the local dollars counties must provide.
Baltimore City Chief Administrative Officer Faith Leach also pushed back on simple per-capita comparisons. Those rankings overlook major differences in local responsibilities, including Baltimore’s role in maintaining major transportation infrastructure and supporting a library system that serves residents well beyond the City line.
DLS Put Cost Shifts Back on the Table
The same DLS briefing projects a State structural and cash shortfall above $2.5 billion in fiscal 2028. DLS listed cost shifts as one of the choices lawmakers may consider during the 2027 Session.
That would save the State money by moving the bill. Counties would still have to fund the service, and local taxpayers would cover the difference through taxes, service reductions, delayed projects, or some combination of the three.
The Task Force cannot discuss new local authority in isolation from that risk. Counties need options they may consider locally. Those options cannot become the rationale for another State funding reduction or mandate.
SDAT Says the Property Classes Already Exist
SDAT Director Bob Yeager walked the Task Force through the property classifications Maryland already maintains. SDAT classifies residential, commercial and industrial, agricultural, vacant, public utility, and other property types and maintains county-level values for those classes.
Those classifications already support differential rates for municipalities. Yeager summed up the difference in county authority plainly: “The municipalities can use them, but the counties can’t.” He described the county request for comparable authority as valid and appropriate.
That existing framework could give the Task Force a relatively straightforward option to consider. The State could authorize counties to apply different rates to property subclasses SDAT already defines and assesses, while leaving each county to decide whether and how to use that authority.
The discussion around data centers showed how that could work in practice. Maryland does not currently maintain a separate property classification for data centers, so SDAT classifies those facilities as commercial or industrial.
Howard County Council Member Christiana Rigby pointed to existing building classifications as one possible way to identify hyperscale data centers. County zoning definitions could provide another route, with that information reported to SDAT for tax purposes.
The discussion also raised questions about whether additional subclasses would require changes to SDAT’s systems and how those costs would be handled. Those details would need further work, but the existing subclass system provides the Task Force with a starting point without requiring counties to create separate assessment systems.
Three Other Property Tax Options
DLS reviewed progressive recordation and transfer tax rates, which counties may already use under current law. Anne Arundel County, Baltimore City, and Montgomery County have adopted progressive structures. Municipalities do not currently have independent authority to levy recordation or transfer taxes.
The indemnity mortgage exemption also returned to the discussion. State changes to the exemption cost counties at least $18.9 million in fiscal 2025 and $12.5 million in fiscal 2026. Those figures understate the loss because several jurisdictions did not report data.
According to DLS, land value taxation would require a much more extensive change to the existing assessment system. DLS estimated $39.1 million in startup costs, including $14.8 million for counties, while SDAT identified significant challenges with separately valuing land and improvements through its current mass-appraisal system.
Recent legislation offers another model. HB 90 / SB 224 from the 2026 session would have allowed counties to establish a special commercial property tax rate of up to 12.5 cents per $100 of assessed value, with the revenue dedicated to education or transportation.
DLS estimated the option could raise as much as $223.6 million statewide if every county adopted the maximum rate. Montgomery County Chief Administrative Officer Rich Madaleno asked for county-by-county estimates showing how much a one-cent commercial property rate would raise. DLS pointed members to the fiscal note for HB 90, which includes a jurisdiction-by-jurisdiction breakdown.
Those numbers would give counties a better way to evaluate the option. A one-cent rate may produce meaningful revenue in one jurisdiction and far less in another, which is precisely why additional authority works better as a local option than a statewide prescription.
The Setoff Debate Needs More Than a Statewide Formula
DLS reported that 18 counties provided $142.7 million in municipal tax setoffs in fiscal 2025. A setoff may take the form of a lower county tax rate inside a municipality or a direct county payment to the municipality.
DLS then outlined several possible State actions: require every county to provide a setoff, require counties and municipalities to agree on a calculation, or write one calculation into State law.
Frederick Mayor Michael O’Connor urged the Task Force to standardize setoffs across Maryland. He pointed to Frederick County’s system, where the county and its municipalities negotiate formulas and where, he said, local leaders generally understand and accept the process. He acknowledged that a statewide requirement would likely require the State to step into local budget decisions.
Frederick’s approach may work for Frederick. That does not make it the right formula for every county and municipality in Maryland. Current law already creates a formal process for municipal requests, financial documentation, county review, public testimony, and local agreements. It leaves room for the service and fiscal arrangements that differ across the state.
The phrase “double taxation” also skips the hard part. Paying county and municipal property taxes does not establish that both governments charge for the same service.
County governments still fund major responsibilities that serve municipal residents regardless of where they live. Public education is the most notable example: counties provide the local funding for Maryland’s public school systems, while municipalities generally do not shoulder that obligation. Counties also fund elections, public health, libraries, corrections, emergency systems, and regional infrastructure, and other essential services.
Even where a municipality performs part of a service, the county cost may not disappear. Counties may still retain dispatch, mutual aid, facilities, debt, personnel, regional coverage, and emergency capacity.
That is why a setoff calculation cannot simply start with what a municipality spends on a service. The calculation must start with the county cost that actually goes away, isolate the property-tax-funded share, measure the service the municipality truly replaces, and account for the county responsibilities that remain.
Prince George’s County uses that type of service-by-service analysis. The county provided $35.5 million across 27 municipalities in fiscal 2026 while accounting for county costs and retained responsibilities behind each calculation.
A statewide formula that overstates county savings could shift costs to taxpayers outside the municipality, including residents of other municipalities with different service arrangements. That could create a new inequity in the name of eliminating “double taxation.”
If the Task Force wants consistency, it can standardize the information without dictating the fiscal result. A current statewide inventory should come first, including services, direct payments, local agreements, calculation methods, and the county costs that actually decline.
What Comes Next
Task Force Chair Wilkins said the panel will continue weighing every option, including proposals the House has considered in prior sessions. The Task Force must submit its recommendations before the 2027 Session.
MACo representatives Christiana Rigby, Council Member for Howard County, and Rich Madaleno, Chief Administrative Officer for Montgomery County, serve on the panel. Their questions at the second meeting moved the discussion toward the information counties would need to evaluate the options, including subclass values, data-center definitions, and county-by-county revenue estimates.
The Task Force’s work now turns toward how these options could work in practice, including which tools make sense for counties and how much flexibility should accompany them. The goal should be a broader menu of options that counties can consider based on their own needs and tax bases.
Maryland’s budget outlook will remain part of that discussion. New local revenue options can provide counties with greater flexibility, but they should add to the tools available to counties, not offset State funding reductions or pave the way for new cost shifts.
As previously reported on Conduit Street, the Task Force began its work with a broad review of local responsibilities, limited revenue authority, and Maryland’s State-local fiscal relationship.
The Task Force’s next meeting will take a different format, with a public forum allowing residents, elected officials, and other stakeholders to weigh in directly on Maryland’s local revenue structure and the options under consideration.
Registration and written testimony details will be released in the days ahead, and MACo will provide an update as more information becomes available.
Stay tuned to Conduit Street for updates as the Task Force develops its recommendations.
Useful Links
DLS: Overview of State Aid to Local Governments
DLS: Property Tax Revenue Options
State Department of Assessments and Taxation: SDAT & Local Revenue Framework