‘Tis the Season for… Property Tax Assessments!

OC Today reported last week that Worcester County’s assessable base has grown from $14.8 billion to $15.2 billion, and is expected to grow to $15.4 billion by the beginning of fiscal 2019 –  meaning about 2 percent more tax revenue to the county.

Wait a minute. Isn’t it a bit early to receive these numbers? Last year, the State Department of Assessments & Taxation (SDAT) released information a few weeks later.

It is early. The article is based on preliminary numbers released annually around this time on SDAT’s website. But those numbers are subject to change. SDAT plans to issue its annual press release in a few weeks, after it has done a bit more due diligence.

Still, the County expects to see slow and steady growth. This year, Worcester’s assessment is limited to Ocean City. From the article:

[County Treasurer Phil] Thompson said the measured growth reached between 1.4-1.5 percent during the last year, and that’s what county residents should expect for the foreseeable future. During the peak boom years between 2004-2006, cumulative county property values exceeded $20 billion.

“We’re trending the way we were 10 years prior to the boom time of 2003-2006,” he said. …

Traditionally, [Ocean City] has been the major driver of property value assessments in the county. However, with the growth and development in West Ocean City, Thompson said the playing field might be leveling off.

“With Tanger Outlets coming to town and the recent hotel development there, we’re seeing steady growth,” he said.

Taxes are responsible for two-thirds of the county’s revenue, Thompson said.

 

 

Counties Receive Legal Issues Update at 2017 Winter #MACoCon

County officials received updates on pending state and federal legal issues on December 6 at the 2017 MACo Winter Conference. The panel was called “From the Bench: A Federal and State Legal Update” and was moderated by Maryland Delegate William Folden.

National Association of Counties (NACo) Associate Legislative Director Jack Peterson discussed several cases before the United States Supreme Court that would address: (1) whether banning political apparel at polling places violates the first amendment ; (2) how and when states can remove individuals from their voter rolls; (3) whether comments made at a public meeting must relate to the topic under consideration; and (4) whether states and local governments can collect sales tax from online retailers regardless of whether they have a physical presence within their jurisdiction.

From left to right: Jack Peterson, Lisa Oschenhirt, Timothy Baker

Peterson discussed several regulatory issues, including the recent definitional change to the federal “Waters of the United States” rule. Peterson noted that the issue would likely remain a top legislative priority for NACo. Peterson also discussed NACo’s efforts to improve the “integrated planning” option under the Clean Water Act that in theory simplifies how local governments can meet federal and state mandates for water quality.

Finally, Peterson discussed several pending federal legislative issues, including extension of the current federal budget so that the government does not run out of money and current tax reform efforts. On tax reform, key local issues included losing the deduction for local income taxes and some property taxes and the removal of the ability to refinance local municipal bonds. Peterson stated that tax reform would probably be done by the end of the year.

AquaLaw Attorney Oschenhirt discussed the permitting process and current litigation for Maryland counties subject to a Phase I or Phase II Municipal Separate Storm Sewer System (MS4) permit. Oschenhirt stated that Phase I controversies included: (1) whether the  permit applied across the entire county or just to those areas of a county that have stormwater systems; (2) whether the proposed permits go beyond the “maximum extent practicable” standard; and (3) whether nutrient credit trading will be included or not.

Delegate William Folden

Oschenhirt also noted that MACo, the Maryland Municipal League, and the Maryland Municipal Stormwater Association submitted joint comments on the new Phase II MS4 permit proposed by the Maryland Department of the Environment (MDE). The comments raised concerns over who should be included in the permit, the geographic scope of the permit, the 20% treatment retrofit burden, and the lack of nutrient trading authority.

Oschenhirt also touched on the pending regulations for nutrient trading, staffing and program funding issues within the United States Environmental Protection Agency, the Chesapeake Bay Total Maximum Daily Load Mid-Point Assessment, tax sales, and state legislation regarding non-flushable wipes.

Maryland State Archivist and Commissioner of Land Patents Timothy Baker highlighted an optional program that is being set up by the Maryland State Archives to encourage county governments to appoint a records officer. The records officer would liaison with State Archives regarding document retention policies and infrastructure.

Montgomery Experiences Revenue Shortfall, Acts Quickly

Montgomery revenues came in short of forecasts – causing, in part, an operating budget gap of $120 million, reports Bethesda MagazineCounty Executive Ike Leggett has already proposed cuts to the County Council balance the $5.4 billion budget.

The shortfall results in part from the November distribution of local income tax revenues coming in “significantly below expectations.” Annual income tax revenue fell $64 million short, and total revenues fell short by $95 million. The rest of the shortfall results from the County’s general fund closing $25 million below expectations for fiscal 2017.

From Bethesda Magazine:

The County Council will have to approve a savings plan to address the shortfall.

Leggett said he expects to send a plan to the council that includes spending cuts and hiring freezes in about 10 days. He noted that the county has approved measures such as reducing its workforce and raising taxes in previous years to deal with declining revenues during and after the recession, which has left officials with few politically palatable options to address the revenue shortfall other than cuts.

“We’ll work our way through this quickly and adopt a savings plan that will address the shortfall and keep moving forward,” Council Vice President Hans Riemer said Monday.

Conduit Street Podcast, Episode #6 – Solar, Solar… Everywhere?

Maryland’s Renewable Energy Portfolio Standard (RPS) requires that renewable sources generate specified percentages of Maryland’s electricity supply each year, increasing to 25% by 2020, including 2.5% from solar energy.

On the latest episode of the Conduit Street Podcast, Kevin Kinnally and Les Knapp discuss the relationship between Maryland’s Renewable Energy Portfolio Standard and local governments.

MACo has made the podcast available through both iTunes and Google Play by searching Conduit Street Podcast. You can also listen on our Conduit Street blog with a recap and link to the podcast.

Listen here:

Senate Continues Tax Reform Tinkering, Vote Expected Friday

On Thursday, the Senate tax reform proposal hit a procedural snag on the chamber floor, delaying action on its final floor vote. The vote is expected to take place on Friday. However, as CNN reports:

Even Republican senators remained unclear about the future of their bill. While most were optimistic the bill would still pass, members acknowledged the uncertainty, joking that they still weren’t set on travel plans to head home for the weekend.

In an effort to assuage Senator Bob Corker’s concerns that the bill would increase the country’s deficit, Senate leadership proposed including a “trigger” in the bill which would automatically increase taxes if the bill failed to generate the economic growth anticipated. However, Thursday evening, the Senate parliamentarian indicated that the proposal violated certain rules and could not be included in the bill as it was. The Senate voted not to recommit the bill to the Finance Committee, but the trigger concept was removed from consideration, placing Senator Corker’s favorable vote in question.

The Senate can afford to lose Senator Corker’s vote – the bill can still pass the Senate even if two Republicans vote against it. It is unclear, however, whether the concern over the deficit will compromise other Republican votes.

Concerns over the costs of the tax cuts further piqued as a new analysis by the nonpartisan Joint Committee on Taxation released Thursday revealed that the tax package would generate significant economic growth, but add $1 trillion to the budget deficit.

From NACo’s Legislative Update from Thursday evening:

The [House and Senate tax reform proposal] versions share broad similarities: both reduce individual and corporate tax rates, revamp the international tax code and eliminate deductions throughout the tax code. Both bills also add between $1.4 and $1.5 trillion to the U.S. deficit, which Republican leadership insists will be offset by economic growth created by the bill and through entitlement reform next year. There are also difference between the bills: the Senate bill sunsets the individual rate cuts, delays implementation of the lower corporate tax rate and has a larger child tax credit.

Following Senate passage, the two chambers will either enter negotiations to address differences between the two packages, or the House will vote on the final Senate package. Final votes could happen as soon as December 6 or 7.

Although negotiations continue, several county priorities are impacted by both bills:

State and local tax (SALT) deduction: The SALT deduction has existed since the federal tax code was founded in 1913, and is a vital tool protecting state and local tax autonomy.

In the House, H.R. 1 eliminated deductibility of state and local income and sales taxes, but retained a capped property tax deduction of up to $10,000.

In the Senate, initial drafts fully eliminated the SALT deduction. This issue remains under consideration, and the final Senate text could mirror the House bill.

Municipal bonds: Tax-exempt municipal bonds are largely unchanged in each bill. However, both bills could impact advance refunding bonds and private activity bonds.

Advance refunding bonds: Advance refunding bonds allow counties to refinance tax-exempt municipal bonds to save taxpayer money on outstanding debt. Currently, counties can issue one advance refunding bond per municipal bond, which saved local taxpayers $12 billion from 2012 to 2016. Both the House and Senate bills would eliminate advance refunding bonds, increasing infrastructure costs for local governments.

Private activity bonds (PABs): Under current law, PABs are tax-exempt and support major infrastructure projects, including hospitals, universities, seaports and airports. The House bill eliminates the tax-exempt status of PABs, while the Senate bill does not make changes to PABs.

 

 

 

 

Preview the 2018 Session “Big Picture”

A compilation of Issue Papers previews major fiscal and policy issues facing the General Assembly in the year ahead. This resource is a handy guide to the top issues that your legislators will be tackling in the year ahead – a great preparation document for county officials in advance of meetings with their local Delegations.

Developed by the Department of Legislative Services, the 2018 Issue Papers are an annual staple for the Annapolis policy-inclined population. They are also a great resource for county officials tracking specific issues, or interested in the state budget and other top-tier topics.

Here are a few direct links to hot topics that may interest counties:

Operating Budget

Transportation Trust Fund

Pension Issues

Capital Budget and Debt

Education Aid and Maintenance of Effort

School Construction

Health Care Reform

Broadband Access

Public Safety

Environmental Issues

Aid to Local Governments

9-1-1 Funding and Modernization

Tax Reform Heads To Senate Floor

The Senate tax reform proposal cleared the Senate Budget Committee on Tuesday, after already clearing its committee of origin, the Ways & Means Committee – sending the bill to the floor.

According to The New York Times, a “flurry of last-minute deal making” ensured that the bill would receive a favorable vote out of the Budget Committee, along party lines. From that coverage:

President Trump went to Capitol Hill on Tuesday for a lunch meeting with Republican senators, where he made promises to some and admonished another.

….

Republicans emerged from the lunch increasingly optimistic about the bill’s fate and playing down the concerns that had threatened to bedevil its passage. Three key Republican holdouts, Senators Susan Collins of Maine, Bob Corker of Tennessee and Ron Johnson of Wisconsin, sounded positive about the bill on Tuesday after gaining assurances from Mr. Trump and the Republican leadership that their worries would be addressed.

Republican leaders are still trying to secure the votes they need to pass the bill on the Senate floor. The Senate plans to begin floor debate on tax reform on Wednesday. A final Senate vote could occur as early as this week, at which point the House and Senate would need to resolve the differences in the two bills.

See NACo’s chart of the differences between the two proposals here. Of major concern to Maryland counties, as well as counties throughout the country, are the elimination are the proposed eliminations of the state and local tax (SALT) deduction and advance refunding bonds. Both bills contain both provisions, although the House bill enables deductibility of property taxes of up to $10,000 per filer.

Tax Reform Provokes State To Expedite Purple Line Bond Sale

The State plans to expedite its bond sale for the Purple Line, securing a year’s worth of funding for the public-private partnership (P3) before the end of December. Why? Because the House-passed tax reform package would end private activity bonds (PABs) – the preferred tool for funding the P3.

Reports The Baltimore Sun:

The sweeping tax legislation approved by the House this month would end the so-called private activity bonds, a tool local governments have used for transportation projects, affordable housing and student loans. Supporters say the financing mechanism reduces costs, but critics view it as a subsidy to private businesses.

PABs allow tax-free borrowing by private entities for public purpose projects, like the Purple Line, private school construction, and affordable housing. They are a key tool for facilitating P3s and private investment in public services.

The Senate tax reform proposal does not call for termination of the bonds.

Learn more about how the State seeks to fund major capital transportation projects at the Winter Conference session, Workshop: An Overview of the New Transportation Scoring LawThe MACo Winter Conference will be held December 6-8, 2017 at the Hyatt Regency Chesapeake Bay Hotel in Cambridge, Maryland. This year the conference’s theme is “The Power of Partnership.”

Learn more about MACo’s 2017 Winter Conference:

Does Federal Tax Reform Kill Maryland’s “Death Tax?”

This session, the General Assembly will consider legislation to chart its own course on the “death tax.”

The U.S. House tax bill proposes eliminating the federal estate tax entirely by 2024 – and the Senate plan raises the existing threshold, so that no one pays estate tax on the first $11 million of inheritance.

Maryland generally couples its tax rules with federal policy, and specifically made its estate tax conform more closely with the federal estate tax in 2014. Under current law, no one pays federal estate tax on the first $5.5 million of inheritance (ensuring this tax already only affects significantly large estates).  Chapter 612 of 2014 made Maryland’s estate tax collection mirror the federal government’s over time. Estates worth $3 million or less pay no Maryland estate tax in calendar 2017; $4 million or less pay no Maryland estate tax in calendar 2018, and, beginning on January 1, 2019, the State exclusion equals the federal exclusion (again, pretty high already, at $5.49 million and indexed to inflation.)

Analysts estimate that the estate tax will bolster the State’s general fund with approximately $132.1 million in fiscal 2018.

Last session, Delegate Jimmy Tarlau introduced legislation to decouple Maryland’s estate tax collection process from the federal government’s. He plans to do so again this year, regardless of where Congress eventually lands on federal tax reform. His legislation would exempt the first $4 million from the Maryland estate tax, taxing estates after that threshold – providing more state general funds for public services. On his Facebook page, Delegate Tarlau indicates that the change would only impact 60 families in Maryland.

The Washington Post reports:

Under current law, Maryland — which has more millionaires per capita than any other state — is supposed to follow federal estate-tax rules beginning in 2019. The state now taxes inheritances greater than $4 million.

Tarlau estimates that raising the exemption level to $11 million could cost Maryland $50 million to $100 million a year. “We need to protect our money for programs like schools, roads, mass transit and tax relief for seniors,” he said.

 

 

Anne Arundel Passes Public Safety Officer Tax Credit

The Anne Arundel County Council has passed the public safety officer tax credit, reports the Capital Gazette.

Councilmember Jerry Walker, MACo Acting President introduced the legislation, which provides public safety officers living within and working for the County with a $2,500 property tax credit. Public safety officers include police, volunteer firefighters, correctional officers and others.

Baltimore City recently passed similar legislation.  squad-car-1209719_1920

All local governments received authority from the State last session to issue a property tax credit to public safety officers who live and work within their jurisdictions through House Bill 979. The new law became effective on June 1, 2017, for tax years beginning in fiscal 2018.

Additionally, the Anne Arundel County Council passed a resolution supporting of a .005 percent property tax reduction – intended to offset any potential tax increase other residents would receive to pay for the public safety officer tax credit.