MD AG Seeks Judicial Review of Wynne Whammy

The Office of the Attorney General has formally requested the Circuit Court of Anne Arundel County to review the Maryland Tax Court’s ruling which essentially raises the Wynne Case refund interest rate from three to 13 percent – a decision which would likely cost Maryland counties $30 to $40 million.

On May 23, the Maryland Tax Court ruled that providing taxpayers lower interest rate payments on Wynne refunds than on other refunds is unconstitutional, because it violates the Commerce Clause. From the opinion:

The Wynne refunds are the result of income tax provisions relating to income earned in other states by Maryland residents that only allow credits against the state income tax and not against county “piggyback” taxes. The U.S. Supreme Court ruled this was unconstitutional.

Following the exact same logic, granting interest at a lower rate must also be unconstitutional.

The Budget Reconciliation and Financing Act of 2014 altered the annual interest rate paid for income tax refunds resulting from Wynne, requiring the Comptroller’s Office to use an annual interest rate equal to the average prime rate of interest during fiscal 2015: three percent.

MACo President Jerry Walker, Council Vice Chairman, Anne Arundel County submitted a letter to Attorney General Brian Frosh on June 11, 2018 requesting that his office seek judicial review of the tax court’s opinion. From that letter:

On behalf of Maryland’s 24 county jurisdictions, the Maryland Association of Counties (MACo) respectfully requests that your office appeal the Maryland Tax Court’s May 23, 2018, decision …. Counties stand at the ready to assist on this front however deemed most helpful and appropriate.

We hope that you can represent the Comptroller, and practically, all of Maryland’s counties, by distinguishing the matter of how the refund interest rate is set from the fundamental Commerce Clause issues inherent in the Wynne case.

[Emphasis added.]

Four days later, the Attorney General’s Office filed its Petition for Judicial Review, and Counsel to the Comptroller Brian Oliner sent MACo this response.

From that letter:

We would like to thank the Counties for offering assistance.

To this end, county attorneys willing to lend their expertise on this matter should contact MACo Associate Director Barbara Zektick, Esquire at bzektick@mdcounties.org.

The case number for this matter is C-02-CV-18-001788. For the most recent information on this case, visit the Maryland Judiciary Case Search website and search this case number in the Anne Arundel County Circuit Court.

Prior Conduit Street coverage on Wynne is available here.

See Attorney General Brian Frosh moderate the panel, Like a Bridge Over Troubled Water: Know Your Water Lawat the MACo Summer Conference. The MACo Summer Conference will be held August 15-18, 2018 at the Rowland Powell Convention Center in Ocean City, Maryland. This year the conference’s theme is “Water, Water Everywhere.”

Learn more about MACo’s Summer Conference:

Lower Crime, Fewer Foreclosures, Faster Permitting…Data Tracking Contributes to County Performance

Prince George’s County’s transforming neighborhoods initiative has contributed to positive results through a CountyStat program focused on gathering and analyzing information from 3-1-1 calls and other sources.

The National Association of Counties article, Building Trust: Performance Metrics in Counties, profiles performance management programs in county governments in Maryland, North Carolina, and Illinois.

NACo writes:

Counties across the country are in a continuous process of performance improvement. From running local health departments to overseeing elections, counties deliver a variety of services and represent an industry of half a trillion dollars in annual operations. Performance metrics have become especially important for counties in face of rising state and federal mandates, decreasing funding shared by states with counties and multiplying state limitations on counties’ ability to raise revenue.

The presentation by Prince George’s CountyStat Director Ben Birge shared several ways that his county program has been able to deliver results, including public safety and customer service outcomes.

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Prince George’s CountyStat program offers service improvements based on data analysis.

MACo’s Summer Conference will include an Open Government and Data Work Group Roundtable, led by Mike Morello of the Governor’s Office of Performance Improvement, and Ben Birge of Prince George’s County Stat.

The conversation at MACo will include insight into how counties can improve outcomes and increase efficiency with existing resources and select the best targets for results from county performance tracking.

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The National Association of Counties survey found that data collection and metric identification to be top hurdles to county government performance improvement programs.

The National Association of Counties found that the biggest hurdles to data analysis for county governments were data gathering and identifying metrics. At MACo, the Governor’s Office of Performance Improvement will offer Round Table will bring forward for conversation:

  • Free data available from the State of Maryland, and
  • Metrics that make the biggest difference to your county’s bottom line

The Round Table will be held on Wednesday, August 15, from 4:30 pm – 5:30 pm at the Roland E Powell Convention Center in Ocean City, MD. To attend the Open Government Work Group Round Table, register for the MACo Summer Conference. Daily registration options are available.

Learn more about MACo’s Summer Conference:

Court Strikes Wynne Interest Rate, Costing Counties $30 Million

Last week, in the latest twist in the Wynne saga, the Maryland Tax Court ruled that providing taxpayers lower interest rate payments on Wynne refunds than on other refunds is unconstitutional, because it violates the Commerce Clause.

The new interest rate, according to the Comptroller’s Office and the court, would be 13 percent.

From the opinion:

The Wynne refunds are the result of income tax provisions relating to income earned in other states by Maryland residents that only allow credits against the state income tax and not against county “piggyback” taxes. The U.S. Supreme Court ruled this was unconstitutional.

Following the exact same logic, granting interest at a lower rate must also be unconstitutional.

The Budget Reconciliation and Financing Act of 2014 altered the annual interest rate paid for income tax refunds resulting from Wynne, requiring the Comptroller’s Office to use an annual interest rate equal to the average prime rate of interest during fiscal 2015: three percent.

The court opinion is estimated to cost counties approximately $30 million, beginning in February 2021.

Last session, MACo succeeded in advocating for delaying counties’ required repayments for Wynne refunds to the Local Income Tax Reserve Account by two years. MACo also successfully fought against a bill which would have raised the interest rate on Wynne refunds to 13 percent, just as the Tax Court just did.

Neither the Attorney General’s Office nor the Comptroller’s Office have indicated yet whether they intend to file an appeal.

Opioid Overdoses: What They Cost Counties

For every three fatal [opioid] overdoses, a local government’s public safety costs can increase by an average of 1 percent, or $150,000, according to research from the data platform OpenGov.

Governing.

In a collaboration with OpenGov, Governing has drawn upon data from five states considered on the “front lines” of the opioid crisis – including Maryland – to estimate the actual costs to counties of combating the opioid epidemic. In addition to each overdose raising costs by approximately $50,000, those costs do not start to plateau until three years later – the amount of time, the publication reports, it generally takes for a county to develop a response.

“During the first year or so, you’re hiring people to respond and you’re building more programs to get ahead of deaths and start to reduce them,” says Joseph Roualdes, head of communications for OpenGov. “Year three is when you see those programs start taking effect and the expenses plateau.”

It does not appear that the cost estimate includes indirect, “ripple effect” costs to counties, such as increased costs for social services for children, emergency worker burnout or costs of lost productivity due to addiction. OpenGov is investigating this next.

Read the article here.

Leggett Issues Line-Item Veto, Favors Stormwater Management Reform

In a rare move shortly before the end of his final term, Montgomery County Executive Isaiah Leggett issued a line-item veto of a portion of the County Council’s approved stormwater management program budget. Leggett argues that the Council overstepped its authority by prohibiting the Executive from restructuring the stormwater management program.

According to the Washington Post:

Instead of the current model of multiple contracts for designing, building and maintaining storm water projects, overseen by the county’s Department of Environmental Protection, Leggett had proposed spending $48.3 million on a contract that would consolidate all three aspects. The contract would still be overseen by the department.

Instead, the Council passed a capital budget on May 24 which would continue the existing contracting method. Environmental groups, such as the Sierra Club, lobbied to keep the program as-is. The Sierra Club argues that the Council’s decision to keep the program as it is enables better opportunity for public review:

This decision enables the continuation of stormwater management projects that were suspended, prioritizes green infrastructure, and prevents the Executive from bundling these projects into a single 5-year design-build-maintain contract. Equally important is that it enables a public review of the program and consideration of alternative implementation models, in a collaborative and transparent stakeholder process.

Leggett stated in a statement:

…[B]y a 5 to 4 majority, the Council opposed the reform of our stormwater management construction program – a decision that threatens our ability to meet important environmental goals and will certainly delay projects designed to meet our State-mandated MS4 permit — I intend to veto this line item in the Capital Budget.

We need to make this program more efficient and cost-effective. And we need to be responsive to County taxpayers who – without changes – will be paying more in stormwater management charges to get less. The status quo is unacceptable.

First Quarter Income Tax Distributions: Tax Reform Impacts Materialize

The Comptroller’s Office has released the tables of county-by-county breakdowns of the first quarter’s local income tax distributions. See them here.

From the Office’s statement:

The distribution totals $1,080.9 million for the counties, growth of 5.1% over last year (Table 2).

Withholding receipts for the first quarter grew 5.0% year over year.  Estimated payments increased 32.6%.  The large increase in estimated payments is likely the result of taxpayer reactions to expectations of a federal tax cut following the November 2016 election, as well as to the eventual passage of the Tax Cuts and Jobs Act.  Taxpayers who expected a federal tax cut would rationally shift income, to the extent they are able, out of tax year 2016 and into tax year 2017.  Some taxpayers may also have been expecting a cut to the capital gains tax rate, which did not materialize. They may now be taking gains from equities they were holding onto in case of a capital gains rate cut.  Also contributing to the growth in the first quarter distribution, the local tax percentage has increased from around 37.22% to around 37.26%.

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Charles Adopts Budget, Invests In Education & Public Safety

The Charles County Commissioners adopted a balanced General Fund budget of download$404,659,200 for fiscal 2019 on May 15. The budget marks a 3.4 percent increase over fiscal 2018. This is the fifth consecutive year in which the County has balanced the budget without increasing tax rates. According to the County’s press release:

The adopted budget protects core services, invests in education and public safety priorities, and incorporates efficiencies in county operations.

Commissioner President Peter F. Murphy stated:

I am pleased that the Board of Commissioners has been able to hold the line on the tax rates while continuing to deliver the high-quality services our community expects and deserves. Our fiscally-responsible choices have resulted in a balanced budget that will be sustainable in the future.

Budget highlights include:

  • $6.49 million increase for Charles County Public Schools
  • $2.96 million increase for the Sheriff’s Office
  •  $2.84 million increase for County Government operations, to fund employees salary increases and hire staff to open the new Waldorf Senior and Recreational Facility
  • Real property tax rate remains $1.141 with an additional $0.064 for Fire and Rescue per $100 of assessed value
  • $457.5 million allocated for the five-year capital improvement program (fiscal years 2019-23) to pay for enhanced school security, school construction, upgrading the county’s 9-1-1 system and investments in new or improved assets including roads, parks, water and sewer infrastructure, and other public facilities

Click here to read about the fiscal 2019 budget proposal.

Baltimore County Adopts $3.3 Billion Budget, No New Taxes

The Baltimore County Council approved a $3.3 billion budget on Thursday for fiscal 2019, which begins July 1. The approved budget includes no tax increases, although Fred Homan, the county administrative officer and acting county executive, indicated that water and sewer rates would have to be increased by at least 12.5 percent.

Pamela Wood reports on the council meeting for The Baltimore SunIn particular, she mentions that Council Member Wade Kach tried, unsuccessfully, to lower the property tax rate:

The budget keeps the rates for property taxes and local income tax the same as they have been for more than 20 years — though Councilman Wade Kach attempted to make a small cut to the property tax, frustrating Democrats who blocked the maneuver. Councilwoman Cathy Bevins accused Kach of “absolute grandstanding.”

The Council voted 7-0 at the same meeting to name Don Mohler as the new county executive. Mohler was the late County Executive Kevin Kamenetz’s chief of staff.

Mohler served for Kamenetz for eight years, and as communications director for former County Executive Jim Smith for eight years, as well. He worked in education for 30 years, as a teacher, guidance counselor, principal and administrator.

Wood reports:

Several mentioned Mohler in particular as someone who could carry out Kamenetz’s vision without using the position for personal or political gain.

Read her article here.

See prior coverage on Baltimore County’s budget here.

As proposed, the late County Executive Kamenetz’s budget funded:

  • a 3 percent cost of living adjustment for employees, effective
    next January
  • 22 new social workers, 23 new counselors and 18 new school psychologists in Baltimore County Public Schools, plus additional pupil personnel workers, health assistants, and bus attendants
  • 19 more police School Resource Officers, increasing the County’s total to 84 officers
  • $979,000 for the first year of Baltimore County College Promise, which provides full tuition and fees to Baltimore County Community College for qualifying students
  • Over $1.8 million toward rat abatement
  • An increase of 7.4 percent to volunteer fire companies
  • nearly $27 million to maintain and improve water and sewer infrastructure and reduce water main breaks and sewage spills
  • $3.9 million to support arts, humanities and cultural organizations in Baltimore County and the region

Property Tax Relief Available To Flood Victims

Last week’s significant rainfall and flooding may have long-term, adverse effects on Maryland residents and their properties – and that may translate to lower county revenues. If property damage results in lower property assessments, counties’ property tax base could potentially take a hit.sand-bags-3157445_1920

Of course, counties appreciate and agree that assessments should be based upon the actual value of properties. That is why they are partners with the State Department of Assessments and Taxation (SDAT), which has created a process to allow residents to contact them for reassessments if their real property has suffered damage from the severe weather. Residents can fill out the Department’s form, available here, and email it to their local SDAT assessment office – which they can find here.

SDAT announces:

SDAT offices have recently been in contact with county governments and other local organizations to offer any assistance and coordination necessary. In the coming weeks, SDAT’s assessors will begin visiting areas impacted by the severe weather, particularly in Washington and Frederick Counties, to locate and identify damaged property. When a decrease in value is confirmed by an assessor—either from an exterior inspection or from a resident submitting the attached application—the new real property assessment will be sent to the County Finance Office and a new tax bill may be issued. If a property owner has already paid their tax bill, a prorated abatement will be issued. If the extent of damage is not clear from an exterior inspection, the attached application will be delivered to the property owner for them to complete and send back. …

SDAT will continue to be in contact with state and local governments to ensure that residents who may qualify for a reduced assessment are aware of this application.

 

Wicomico Schools Continue Push For Pre-K Funding

The Wicomico Board of Education (BOE) is asking Wicomico County for an additional $5.7 million above the $43.7 million already included at maintenance of effort (MOE), to “establish universal pre-K, improve the graduation rate, and attract and retain a strong workforce,” according to The Dispatch.

School Superintendent Donna Hanlin pointed out to the County Council at a work session this week that nearly 76 percent of students in Wicomico County are considered an at-risk population. Universal pre-K would benefit a significantly large part of the community, she argued. From The Dispatch:

“We need to be working with these students as early as we possibly can,” she said.

School officials said they are asking for $1.3 million in the coming fiscal year to launch the first phase of its pre-K initiative within existing facility space. In the future, they said the school system would seek an additional $3.2 million to install modular buildings that will house pre-K classes. ….

Wednesday’s work session with the school board and other departments was just one of many scheduled in the coming week. The fiscal year 2019 budget will be adopted in June.

In County Executive Bob Culver’s proposed fiscal 2019 budget introduction, he states:

The recurring BOE request of $5,704,383 is over MOE and can only be funded through a property mil rate increase of 8.46 cents or by cutting other core services by that amount which isn’t feasible.

The $3,200,000 request for Pre K modular buildings should not be financed because of the likely short term use (certainly less than a 20‐year amortization period). Therefore, it requires use of fund balance or additional property taxes (another 5.35 cents). Increasing the use of fund balance isn’t a recommended course of action.

Funding the entire BOE request through property taxes would require a 13.81 cent increase (14.7%) in our mil rate elevating it to $1.078. That would result in the fifth highest mil rate in the State levied on the 18th lowest property base.

The proposed budget of $151.4 million focuses on “Wicomico County’s core service needs: Public safety and health, education and infrastructure.” It proposes no property tax rate increases, but does tap into fund balance. General Fund debt service for fiscal 2019 is $14.7 million, or 10.4% of new General Fund revenue.  General Fund proposed appropriations include 41 percent for education, 36 percent for public safety and health, and 11 percent for general government services. The budget proposes that eligible employees receive a 2 percent salary increase.