Route Fifty: More Mileage From Mileage Fees

The national gas tax has remained 18.4 cents per gallon since 1993, and despite recent comments by President Trump that he would entertain the possibility of raising the tax to fund infrastructure improvements, many remain unconvinced that movement will happen on that front anytime soon. Clearly the country’s infrastructure could use additional funding: the American Society of Civil Engineers recently graded the U.S.’s infrastructure with a D+, estimating that it would take an additional $2 trillion by 2025 to bring that grade to a B. States are picking up the slack, reports Route Fifty: more than twenty have raised their own gas taxes, while others have increased registration fees and tolls.

Route Fifty argues that the time has come to assess a mileage fee, or Vehicle Miles Traveled (VMT) Tax:

One possible solution—the mileage fee, or VMT tax—seems to be one whose time has come. The tax reorients the transportation “product” that users are paying for with a philosophy more in step with how people travel now. Simply put, drivers pay for their travel based on a per-mile rate. It’s almost like slapping a toll on every road, except that mileage could be measured and billed based on a low-fi transponder, or a high-tech piece of cellphone gadgetry. Drivers could alternatively pay through a one-time annual fee, if they hate the feeling of being “tracked.”

Mileage fees would still need to be kept up with inflation, but they wouldn’t be sensitive to gains in fuel efficiency. They could also be adjusted to reward environmentally sensitive vehicle choices, and policymakers could send chunks of VMT tax revenues towards transit investments, so the fees needn’t be punitive or regressive. …

A VMT tax attracts a politically diverse following: State DOT leaders and policy wonks love it, but so do libertarians at the Reason Foundation. And in many ways, taxing miles better matches the current transportation landscape: This is, after all, an era where technology is rewriting the rules on how people move, and how they relate to transportationMobility is evolving into a service, rather than a commodity, that can be summoned and paid for by an phone—whether by buying a subway ticket, locating a bike rental, or hailing a shared autonomous vehicle. A VMT tax matches that reality. It would be a true “user fee,” gathering dollars from those who drive on roads, without forcing those who get around using other modes to subsidize them (which the current transportation funding structure does, given how weak the gas tax has become).

Route Fifty calls out Oregon, California, Minnesota, Pennsylvania, Connecticut, New Hampshire, Delaware and Vermont for exploring mileage fees and taxes. Maryland’s General Assembly, on the other hand, considered legislation this past session to prohibit the state and counties from assessing a VMT tax, as it has for the previous two years. Senate Bill 284 died in committee.

Read the full article here.

Pew: Maryland Leader In Evaluating Tax Incentives

The Pew Charitable Trusts has named Maryland one of ten leading states in tax incentive evaluation, with plans for review of the effectiveness of its incentives, experience in producing quality evaluations, and process for informing policy choices. Pew lauds Maryland in its latest report, How States Are Improving Tax Incentives for Jobs and Growth: A national assessment of evaluation practices, issued this month.

From the report:

• Maryland is leading other states because it has a well-designed plan to regularly evaluate tax incentives, experience in producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.

• Lawmakers have used the evaluations to make improvement to incentives, including a tax credit for rehabilitating historic buildings.

• Since new incentives are not automatically added to Maryland’s review schedule, lawmakers will need to update the schedule periodically to ensure that it remains comprehensive.

Maryland first required tax credit evaluations under the Tax Credit Evaluation Act of 2012, which established a legislative process for evaluating certain credits. The Department of Legislative Services (DLS) is required to publish a report evaluating the tax credit. The report submitted by DLS must discuss (1) the purpose for which the tax credit was established; (2) whether the original intent of the tax credit is still appropriate; (3) whether the tax credit is meeting its objectives; (4) whether the goals of the tax credit could be more effectively carried out by other means; and (5) the cost of the tax credit to the State and local governments. The evaluation committee must hold a public hearing on the evaluation report, and is required to submit a report to the General Assembly that states whether or not the tax credit should be continued, with or without changes, or terminated.

Mayor Pugh Explores Tax Incentives to Redevelop Park Heights

The city’s blighted and troubled Park Heights community may soon get a boost through tax incentives, Mayor Catherine Pugh said Wednesday.

The mayor, speaking at a news conference at City Hall, said she is considering a tax increment financing district in the Northwest Baltimore community.

As reported in the Baltimore Business Journal,

A restoration of the Park Heights area has been underway for about five years after the establishment of the nonprofit Park Heights Renaissance group, which has targeted demolition of certain areas of vacant buildings and houses and redevelopment. But those efforts have rolled out in fits and starts, and the community, long ignored for decades and plagued with drug dealing and violence, has continued to struggle.

Recent debate over the future of 147-year-old Pimlico Race Course in Pimlico near Park Heights has brought the area back into a larger spotlight, Pugh said.

The Maryland Stadium Authority in February released the first phase of a study on the Pimlico Race Course that concluded the facility needed about $320 million in renovations and upgrades. Pugh’s response has been to support keeping the Preakness Stakes race in Baltimore, even as the Stronach Group, owner of Pimlico, has signaled a possible move to Laurel Park because the current Pimlico structure cannot support the addition of modern skyboxes and upgrades.

“In Pimlico, we ask should we be looking at a TIF area?” the mayor said.

The TIF possibilities — which would offer the sale of bonds to private investors in return for funds for infrastructure for new development — is a part of the ongoing discussions to keep the Preakness Stakes in Baltimore, said Anthony McCarthy, the mayor’s spokesperson.

It would join other city TIF districts including Mondawmin Mall, Clipper Mill, Belvedere Square, East Baltimore Development Corp. and Port Covington.

McCarthy said a press conference is expected to be held within the next two weeks to discuss “the mayor’s clear mandate to renovate the neighborhood” in Park Heights and he said the discussions are ongoing now within the public and private sector to make sure the Triple Crown race remains at Pimlico.

Read the full article for more information.

Calvert Sustains Existing Tax Rates, Protecting AAA Rating

Calvert County commissioners voted against decreasing the county’s property tax rate on Tuesday night, May 2, after Commissioner Steve Weems proposed the reduction from the current rate of $0.952 to $0.928 per $100 of taxable assessment.

Commissioners considered that the decrease could jeopardize the county’s AAA bond rating by all three rating agencies. Calvert is currently enjoying this rating from all agencies for the first time ever. TheBayNet.com reports:

“One of the bond rating agencies’ concerns has always been the county’s willingness to enhance revenues and sustain those actions,” Department of Finance and Budget Director Tim Hayden stated in a memo to the commissioners. “As you know, the county’s excellent bond ratings save the taxpayers hundreds of thousands of dollars in interest expense over the life of the financed project.”

The commissioners voted to raise the property rate by six cents last year, the first property tax raise in the county in 29 years. The commissioners cited a number of reasons for the increase at the time, including slow recovery from the Great Recession and cost shifts from the state for public school teachers’ pensions and roads funding.

Regarding last night’s decision not to pass the decrease:

Weems acknowledged that the deceased revenue would reduce the county’s appropriation for other post employment benefits (OPEB) by $5.7 million. He added, however, county public school teachers would still get raises and the county’s road paving schedule would remain intact. Weems cited addition tax revenues coming from Dominion Cove Point in fiscal year 2018 as being further justification for the rate decrease. “What are we doing for the citizens of Calvert County?” Weems asked, adding that the residents who pay the lion’s share of the county budget with property taxes deserve a tax reduction.

The additional money from Dominion—a result of the local plant’s liquefaction project—is a $25 million payment in lieu of taxes (PILOT) allocation.

Visit TheBayNet.com for the full article.

 

Tennessee Counties Get A Local Infrastructure Fast Track

Tennessee just increased their gas tax – and that state is sharing its additional transportation revenue with its counties. Last week, Governor Bill Haslam signed the Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy (IMPROVE) Act – which is estimated to provide $250 million to the State Department of Transportation, $35 million to cities, and $70 million to counties.

The Act also grants the state’s most populated counties the authority to approve additional tax increases for local transportation projects, if approved by referendum. According to The Tennessean:

Twelve of the state’s most populous counties will be allowed to hold a referendum to ask their residents if they would approve additional tax increases to help pay for transportation projects, including mass transit. If voters approved the referendum, the taxes that local governments could raise are: sales tax, business tax, car rental tax, hotel/motel tax, residential development tax and wheel tax.

Additional surcharges enacted would be capped at 20 percent of the current rate.

Any proposed projects funded by the additional surcharges would be subject to an audit by the state’s comptroller, who would need to sign off on the plan in advance.

Overall, the IMPROVE Act increases the state’s gas tax from 21.4 cents per gallon by six cents per gallon over three years. Diesel taxes increase by 10 cents over three years.  The IMPROVE Act also increases some vehicle registration fees and offsets the impact on its residents’ wallets by decreasing other taxes.

Haslam and others have argued every area in the state will see their projects funded through the bill, and the measure will prevent local governments from using alternative means, such as increasing property taxes, to pay for needed improvements.

Tennessee counties own 64 percent of the State’s public road miles and receive 20 percent of the state’s transportation funding, according to data from 2014 provided by the National Association of Counties. In comparison, Maryland’s counties (excluding Baltimore City) own 69 percent of the public roads, and receive 1.4 percent of highway user revenues. When the Maryland General Assembly increased the gas tax five years ago via the Transportation Infrastructure Investment Act of 2013, none of those new revenues funded local roads and bridges – all of that money funds the Maryland Department of Transportation.

Wicomico County’s Budget Proposal Benefits from Real Property Base

Wicomico County Executive Culver has presented his proposed operating budget to the County Council.

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Wicomico County’s proposed operating budget total is a 6.2% increase over the current year’s budget. 

As described in the Wicomico County Budget proposal, a continued increase in the County’s net assessable real property base and a positive trend in employment support county investments in services, while allowing the county to maintain current tax rates.

Here are a few highlights from the budget as described in the budget summary and as reported by the Salisbury Independent:

Total Operating Budget

  • “The budget formally presented Tuesday to the County Council totals $143.7 million, a 6.2 percent increase over the current year’s budget of $135.2 million,” according to the Independent.

Education Funding

  • The budget satistifies the maintenance of effort requirement for the county, including an increaseof more than $1 million required by the maintenance of effort escalator.

Taxes

  • Tax rates remain unchanged in the proposed budget.

Government Employee Salaries

  • Eligible employees will receive a 2% COLA and Communications Operators will receive a salary increase.

For more information, see Culver unveils $143.7 million spending plan from the Salisbury Independent and the proposed operating budget for Wicomico County.

Howard County’s Proposed Budget ‘Holds the Line’ on Taxes

Howard County Executive Kittleman has presented his proposed operating budget to the County Council.

Here are a few highlights of the budget from the budget summary document.

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Howard County’s $1.58 billion proposed budget maintains tax rates while providing extra funding for education.

Total Operating Budget

  • “$1.58 billion, a 5.6 percent growth from last year’s budget. . . Excluding one-time resources (use of prior fund balance for one-time expenses), the proposed General Fund budget represents an increase of $39.3 million, or 3.7 percent over FY 2017.”

 

Education Funding

  • “This proposed budget includes a $572.2 million direct appropriation for HCPSS, $10 million higher than prior year and $2.3 million above the required Maintenance of Effort (MOE) level.”

Taxes

  • “As with the Capital Budget, this budget was carefully prepared to address our residents’ priorities and our county’s challenges while holding the line on taxes and incorporating a fiscally prudent approach.”

Government Employee Salaries

  • “This budget provides funding for a well-deserved cost of living increase and step increments for general county employees and for negotiated salary increases for employees covered by collective bargaining agreements. The budget also continues our effort to convert contingent employees who work full-time hours to full-time positions with full benefits. To date, we have converted 49 positions and the FY 2018 budget will continue that effort.”

For more information, see the entire proposed operating budget for Howard County.

2017 End of Session Wrap-Up: Taxes and Revenues

The segments below provide a brief overview of MACo’s work to protect and grow county revenues in the 2017 General Assembly. 

Follow links for more coverage on Conduit Street and MACo’s Legislative Database

Income Tax

Repayment Forgiveness

Push Icons-WON

MACo successfully supported a bill which repeals the requirement that local governments must reimburse the Local Income Tax Reserve Account for overpayments of local income tax revenue distributions made by the Comptroller. Senate Bill 397/House Bill 1433 allows for funds to be drawn from the Account, rather than local government budgets, to rectify errors for which they are not responsible. The legislation has passed the General Assembly and is awaiting the Governor’s signature. Bill Information | MACo Coverage

Many, Many Refunds

Push Icons-DEFEATEDMACo sought to oppose a bill that would have allowed a taxpayer who did not file a protective claim to file an amended income tax return, going back to tax year 2006, to claim a refund pursuant to the final decision under Maryland State Comptroller of the Treasury v. Brian Wynne. The hearing on Senate Bill 345 was cancelled and no further action was taken. Bill Information

Subtraction Modifications

Every year, many bills are introduced in the General Assembly that reduce or adjust the income taxes paid by residents of Maryland. Some of these bills, called subtraction modifications, cause a decline in local revenues – even if it appears that only the State is granting the tax break. MACo suggests that instead of subtraction modifications, legislation could provide state tax credits, funded with state but not local income tax revenues, which do not deplete county resources for education, public safety, and needed community services.

Push Icons-NOT IDEALSenate Bill 597/House Bill 100, referred to colloquially as the “Hometown Heroes Act” and substantially similar to the Administration’s Senate Bill 322/House Bill 388 of that name, provides for a subtraction modification for the first $15,000 of retirement income for individuals at least 55 years of age who are retired law enforcement officers or fire, rescue, or emergency services personnel. MACo opposed this legislation on the grounds that it would cause local revenues to decrease by $2.5 million in FY 2018 and by $2.8 million in FY 2022. This legislation was passed by the General Assembly and awaits the Governor’s signature. Bill Information | MACo Coverage

Push Icons-DEFEATEDMACo also opposed two bills creating a subtraction modification equal to 100% of the total interest paid on qualifying student loans if the taxpayer earns under certain income thresholds. House Bill 196 and the Administration’s Senate Bill 320/HB 399 “Student Debt Relief Act of 2017” did not advance out of committees in either chamber.

Find Conduit Street coverage of a number of income tax subtraction modification bills here.

Property Taxes

Increased Flexibility

MACo supported several pieces of legislation that provide counties more flexibility to provide property tax breaks. None of the bills listed below set any mandates on counties, but rather, provide broader leeway to provide tax breaks as appropriate for their jurisdictions.

Push Icons-WONMACo successfully supported legislation that extends the deadline for local governments to set or change their homestead property tax credit percentage, moving it from November to March. House Bill 351 passed the General Assembly and awaits the Governor’s signature. Bill Information | MACo Coverage

 

Push Icons-WONMACo supported a bill to authorize local governments to grant optional property tax credits to homeowners who make improvements to their homes in specified “revitalization districts,” as designated and determined by the local jurisdiction granting the credit. House Bill 1323 was passed by the General Assembly and awaits the Governor’s signature. Bill Information | MACo Coverage


Push Icons-IMPROVEDMACo supported with amendments a bill to create a tax incentive program to encourage businesses to locate and expand in several jurisdictions suffering economic stresses.
MACo’s amendments expanded the program participation to “distressed areas” in any jurisdiction and limited the tax deductions to businesses moving into or expanding within Maryland, to prevent against businesses relocating inside the state. Senate Bill 796 did not advance out of committee. Bill Information | MACo Coverage

Fending Off Revenue Source Elimination

Push Icons-DEFEATEDMACo helped stop a bill that would have eliminated a significant revenue source to counties by exempting all personal property from personal property taxes, other than railroad, public utility or specified telecommunications personal property. House Bill 215 received an unfavorable report and was withdrawn. Bill Information | MACo Testimony

Refund Requirement

Push Icons-IMPROVEDMACo successfully amended a bill requiring counties to pay refunds resulting from property tax assessment appeals within an established time frame. House Bill 1402 passed both chambers with MACo’s amendments, to make the bill’s requirement more feasible for county governments to carry out. It now awaits the Governor’s signature. Bill Information | MACo Coverage

Other Taxes

Push Icons-NOT IDEALMACo supported a bill that would require websites that coordinate accommodations between guests and hosts, like from Airbnb and VRBO, to collect and remit local hotel rental taxes. Senate Bill 93/House Bill 935 relieved the individual host from the responsibility, placing that onus on the intermediary company. The legislation did not advance out of either committee. Bill Information | MACo Coverage

Push Icons-IMPROVEDMACo provided amendments to an admissions and amusement tax exemption bill for agritourism, to make the exemption a local option. Senate Bill 716 did not advance out of committee, on the basis that counties already have authority under state regulation to enact exemptions to this tax. Bill Information | MACo Coverage

 

Push Icons-WONMACo also supported a bill which would create a new exemption from the transfer and recordation tax for the transfer of property from a sole proprietorship to a limited liability company (LLC) if the sole member of the LLC is identical to the converting sole proprietor. Over the interim, MACo successfully addressed a loophole to prevent unfair tax avoidance. The General Assembly passed Senate Bill 111/House Bill 363 and it awaits the Governor’s signature.  Bill Information | MACo Coverage

Click here for a round up of the wrap-ups for all policy areas

Three Counties To Receive State Funds For Open Spaces

During the evening on Sine Die, the General Assembly passed Senate Bill 273, which provides State funding for counties with large amounts of tax-exempt State forests, parks, and wildlife management areas, beginning in fiscal 2019 – a bill MACo avidly supported. As frequently is the case, there is a caveat:

The House amended the bill on Sine Die to further restrict funding to counties which either have at least 65,000 acres of qualifying State-owned land, or 40,000 acres and have a county property tax rate of at least one dollar per $100 of assessed value: namely, Allegany, Garrett, and Somerset. 

SB 273 establishes an Open Space Incentive Program which, as originally introduced, would have provided counties an annual payment of $250,000 for every 10,000 acres attributed to State forests, State parks, and wildlife management areas. As amended in the Senate, however, it would have required the state to only pay those counties with at least 40,000 acres of qualifying open space (Allegany, Dorchester, Garrett, Somerset, and Worcester), and pay them the equivalent of property taxes for the land. The payments are allocated through an analog to a Payment In Lieu of Taxes (PILOT) program, in fairly wide use across Maryland. Beginning in Fiscal 2019, the State would pay the qualifying counties the amount they would receive in property taxes if the land were not government-owned.

As passed, according the fiscal note, the bill provides the following counties the listed estimated annual payments, beginning in fiscal 2019:

  • Allegany: $820,680
  • Garrett: $1,158,300
  • Somerset: $490,000

In addition, Worcester and Dorchester would receive funds if they raised their property tax rates to at least one dollar per $100 of assessed value.

Governor Larry Hogan supported the bill and is anticipated to sign it.

 

 

Resurrection of Healthcare Reform, Three Questions About Sanctuaries

The National Association of Counties (NACo) held a conference call today on federal legislation and regulations that affect counties.

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NACo’s policy team began their federal policy update call by stating that, for NACo, review of federal policy is not seen as a partisan topic, but an issue of federalism and intergovernmental relations.

Overview

According to NACo’s policy team, the concern regarding many current federal proposals is a common underpinning of achieving federal budgetary savings through cuts to state and local governments.

Healthcare

Counties are a key part of the nation’s health system. Nationally, counties spend $84B a year on residents’ healthcare, counties spend $25B on premiums for their own employees, and counties own hospitals and other medical infrastructure, according to NACo.

Healthcare reform is still very much alive the NACo Policy Team reports. The President and leadership are working on efforts to revise the legislation that was withdrawn. What was put forth previously would have cut medicaid spending and other public health funding that states and local governments currently use to provide services. At the same time, the legislation would only have delayed, not repealed the Affordable Care Act’s Cadillac tax on counties and other entities according to NACo.

Given Congress’s schedule, NACo does not predict the next steps for healthcare reform to emerge until May 2017. For more information about the legislation that was proposed previously and its effect on county governments, see ACA repeal, replacement raises concerns for counties.

Tax Reform

Comprehensive tax reform has been a goal of Speaker Ryan’s for a while, as described by NACo’s tax policy lead. NACo cannot predict, however, whether this year will bring significant tax reform, or not.

There are two primary issues that NACo tracks in the area of tax reform:

  1. The tax exempt status of municipal bonds, and
  2. The state and local tax deduction

Municipal bonds have funded 75% of the nation’s infrastructure over the years, according to NACo. The concern is that the municipal bond interest exemption will be cut or capped through tax reform, threatening the utility of this infrastructure-building tool. For more information, see MACo’s prior coverage on municipal bonds.

The state and local deduction is worth $1.3T over ten years, according to NACo. But the issue is not just the loss of dollars to counties, but also the double-taxation of local residents. Maryland is not one of the handful of states that gains the most from this deduction, according to the Tax Foundation:

The deduction’s effect is for lower- and middle-income taxpayers to subsidize more generous spending in wealthier states like California, New York, and New Jersey, reducing the felt cost of higher taxes in those states.

Infrastructure

Trump has stated his interested in an $1T increase in infrastructure, as recently as yesterday morning, according to NACo’s policy lead. NACo has a good relationship with the presidential advisor on infrastructure and NACo’s policy team is meeting with him in-person next week.

According to NACo, infrastructure needs are outstripping the ability to raise revenue nationwide. NACo advocates for the public sector to have a seat at the table as the executive branch explores possibilities for private sector involvement.

On May 16-17th NACo is hosting an infrastructure week fly-in. For more information, look for updates on the NACo website or contact Kevan Stone at NACo.

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Sanctuary Cities and Counties

NACo clarified that U.S. Immigration and Customs Enforcement (ICE) detainer requests are voluntary. If a county honors a detainer request without a court order or established probable cause, the county could be held liable.

Questions that remain:

  1. What is a sanctuary jurisdiction? There is no clear definition.
  2. What can the government do legal to encourage compliance? The question here is whether the federal government withhold grant funds.
  3. What does 8 U.S.C. 1373 require from county governments, if anything? This centers on reporting requirements.

NACo and partner organizations are hosting a webinar April 18, 1pm Eastern Standard Time on this issue. For more information, join the webinar Legal Issues Surrounding the Executive Order on Sanctuary Jurisdictions and see the NACo Analysis.