Barbara Zektick Joins MACo Policy Team

BZektickMACo is pleased to announce the hiring of Barbara Zektick, Esq., as Associate Director, a new member of MACo’s policy team. She joined the office staff today, and will be representing county governments on a wide range of policy issues – from fiscal and taxation topics to transportation.

Ms. Zektick has extensive background in both state and local government, and has served as a public sector advocate for years in Annapolis. She worked for Baltimore City government for more than five years, serving as policy advocate in state legislative matters, and then rising to leadership posts with the City’s Department of Transportation. She most recently served as the Department of Transportation’s General Counsel, where she oversaw and led a variety of efforts – legislative outreach, rights-of-way management, contracts and procurement, and legal advice.

Previously, Ms. Zektick worked for the Maryland Department for Transportation, initially piloting Transit Oriented Development efforts and legislation, and then moving into a more formal policy role in the Department’s Annapolis offices.

She has a J.D. from American University, and a bachelor of arts degree from the Johns Hopkins University.

Hogan Discusses Local Transportation & Economic Development During Televised Interview

During a recent televised interview with Salisbury-based WBOC, Governor Larry Hogan discussed a wide range of topics regarding local, state, and national issues. During his conversation with WBOC reporter Tashwana Gaines, Governor Hogan renewed his commitment to local transportation projects and economic development.

Watch the full interview below:

For more on the one-on-one interview, visit the WBOC website.

Transit Officials to Pitch Regional Tax for Metro

The Metropolitan Washington Council of Governments and Greater Washington Board of Trade plan to pitch a regional tax plan for the Metro system to the Maryland and Virginia legislatures.

As reported in The Washington Post:

Top local government and business groups said Monday that they will press the Virginia and Maryland legislatures in early 2018 to approve a regional tax or other funding mechanism for Metro to help pay the steep costs of renovating the long-neglected system.

The transit chiefs — from New York, Chicago, Atlanta and elsewhere — also said they had faced many of the same challenges as Metro. They said the Washington region’s system could recover from chronic problems with safety and reliability if it were given good leadership, together with sufficient time and money.

Metro is the only major U.S. transit system that does not receive a substantial amount of revenue from a reliable funding stream, such as a region wide sales tax. Decades of efforts to set up such a source have failed partly because Virginia, Maryland and the District couldn’t agree on a plan, and partly because local politicians were loathe to raise taxes.

The lack of revenue has contributed to Metro’s failure in recent years to keep up with investments needed to maintain the system in a state of good repair.

But COG and the Board of Trade hope to overcome the obstacles with what amounts to a two-part plan. First, they want to set firm benchmarks for improving Metro’s performance on safety, reliability and financial management. Second, they want to convince legislators outside the metropolitan area that fixing the subway is vital to prosperity in the Washington region, which is the economic engine for both Virginia and Maryland.

For more information read the full article in The Washington Post.

Proposed Accounting Rule Could Highlight Fed Tax Treatment of State & Local Govts

A proposed new accounting rule may alter the presentation and description of “tax expenditures” affecting state and local governments under federal tax policy.

From a recent Governing article:

The new rule, proposed by the Federal Accounting Standards Advisory Board (FASAB), would require the feds to include in annual financial reports the “revenue impact” (but not a precise calculation) of all Washington’s lost revenue from tax breaks. The U.S. Treasury Department already estimates the cost of these expenditures, but they aren’t included in federal annual financial reports.

Justin Marlowe, a Governing contributor and public finance professor at the University of Washington, says the change “would draw more attention to the particularly big areas of deductions and exemptions,” and help critics of those expenditures make a case for getting rid of them.

Both Congress and President Obama have proposed limiting or repealing the tax exemption for muni bonds, but state and local government groups have lobbied hard to keep it. That’s because the benefit allows states and municipalities to offer a lower interest rate on those bonds, meaning it costs less for them to finance infrastructure projects. A study last year found that the tax-exempt status of muni bonds has saved governments an estimated $714 billion in extra interest payments from 2000 to 2014.

Read the full proposed rule, open for public comment, online at the Federal Financial Accounting Standards Board website.

New Faces, New Direction for Maryland Sustainable Growth Commission

At its May 23rd, 2016, meeting in Cumberland, the Maryland Sustainable Growth Commission began charting a new course following a significant turnover in members due to expiring appointments. As previously reported on Conduit Street, the new Chair of the Commission is Susan Summers.  Garrett County Planning and Land Management Director Deborah Carpenter and MACo Legal and Policy Counsel Les Knapp remain the MACo representatives on the Commission.

Commission members expressed interest in looking at: (1) small business growth and entrepreneurship; (2) infrastructure financing, tools, techniques, and policies; (3) tax policies to support reinvestment; (4) transportation policies; and (5) the Commission’s previous recommendations from its Reinvest Maryland report. The Commission will also continue its existing focus on rural economies and land use and education and outreach.

Released in 2014, the Reinvest Maryland report included over 60 recommendations to encourage infill, revitalization, and redevelopment within a subset of the Priority Funding Areas (PFAs) and discourage new development outside of the PFAs. The Commission has appointed a workgroup, including Knapp and Carpenter, to review and suggest updates and revisions to the previous report.

Baltimore Street, Cumberland, MD
Baltimore Street, Cumberland, MD

The Commission also heard from Allegany County, Garrett County and Cumberland planning and elected officials and toured the proposed Baltimore Street revitalization site in downtown Cumberland.

The Commission’s next meeting is scheduled for July 25 in Denton.

Useful Links

Maryland Sustainable Growth Commission Website

List of Commission Members

Reinvest Maryland Report – Fast Download Version (4 MB)

Reinvest Maryland Report – Full Resolution Version (22 MB)

Reinvest Maryland Report Appendices

Prior Conduit Street Coverage of Sustainable Growth Commission

California Joins Oregon In Testing VMT as Gas Tax Alternative

A Governing article (2016-05-24) reported that California is set to join Oregon in testing alternatives to the state’s gas tax, including charging by vehicle miles travelled (VMT). The article noted that California is launching a nine month pilot project starting this July in response to its declining gas tax revenues.  From the article:

The pilot project comes as the gas tax continues to lose its buying power. In nearly two-thirds of states, gas taxes have not kept up with inflation. What’s more, California estimates it will lose half of its fuel tax revenues by 2035 because of increased fuel efficiency. …

While states are a long way off from scrapping their fuel taxes entirely, these initiatives help them prepare for the future, said Jim Madaffer, a former San Diego council member who now chairs the California Road Charge Pilot’s technical advisory committee. “The whole purpose of the pilot is to come up with some ideas so we can find a way to have a long-term, reliable funding source.”

Under California’s trial, drivers will get to choose how to keep track of the miles they drive, either by buying a decal for an allotment of miles or using GPS-enabled systems to tally them. That’s more options than Oregon offers its drivers under its mileage tax program, which launched last summer. …

While both states designed programs for 5,000 vehicles, fewer than 900 were participating in Oregon’s program as of April. More than 8,000 Californians, on the other hand, have signed up for the program there.

The article also stressed that other states are watching Oregon and California closely and that the federal government is also providing incentives to states that test gas tax alternatives:

[Declining gas tax revenue is] one reason states will be watching California’s and Oregon’s experiments closely. Another is that the federal government wants states to test alternatives to the gas tax. The FAST Act, the transportation funding law that passed Congress last year, includes $95 million over five years to help states run programs similar to California’s and Oregon’s.

Useful Links

Oregon’s “OReGO” VMT Tax Website

Airbnb Driving Conversations About Neighborhoods, Oversight

The fast-growing online booking platform Airbnb is triggering policy conversations about local regulations, taxation, and land use

Two recent articles from the online site Grist discuss policy implications of homeowners offering short-term stays through online booking platforms like Airbnb.

From a May 6 article:

In the beginning, Airbnb was hailed as a savior for travelers and renters alike. Travelers would no longer be forced to shell out for overpriced hotels, and locals could open their homes to visitors and generate money to help pay the rent. It was a mutually beneficial arrangement, with the hospitality industry bearing the brunt of the disruption. But eight years after it launched, Airbnb isn’t just hurting the Marriotts and Holiday Inns of the world; it’s hurting people who rent.

The original idea behind Airbnb was that people could rent out air mattresses or spare rooms in their own homes, but the platform quickly expanded to include rentals of whole apartments and houses. Then landlords started to realize that they could bring in vastly more money by offering short-term rentals on sites like Airbnb and HomeAway than by offering year-long leases to traditional tenants. That’s why Towers and other critics blame Airbnb for gentrification, displacement, and the rising cost of rent.

A follow-up item on May 13 discussed initial forays into “neighbor incentives” by local governments abroad to target illegal rentals:

Rental services like Airbnb and VRBO take up valuable real estate for short-term stays. This can mean that housing supply goes down, rent goes up, and residents get displaced by visitors, as we noted last week. That’s a big enough problem that now at least two German cities are asking their citizens to snitch on neighbors who are illegally renting homes to tourists.

Berlin, which has banned most vacation apartment rentals, has a website that enables people to anonymously inform on law-breaking landlords. And now Munich, which has also introduced laws cracking down on short-term rentals, is considering launching a snitch site as well, CityLab’s Feargus O’Sullivan reports. Even before the city’s leaders started talking about setting up such a site, the Munich Renters’ Association publicized an email address that people can use to tattle on their neighbors.

Legislation was introduced in Maryland in 2016 to address taxation of Airbnb and comparable services, but did not advance. MACo signaled its willingness to sort through details of the bill – such conversations seem likely in the interim period before the 2017 session.

A different bill moved through the Virginia legislature in 2016, but was converted in the latest stages to a study.

MACo’s budget and finance affiliate is planning to discuss taxation and oversight of short-term rentals at its upcoming meeting, a setting to assess current practices and county perspectives on potential statewide legislation.

Maryland Board of Public Works Expected to Keep Property Taxes Flat

At its April 27 meeting, the Board of Public Works will set the state property tax rate for FY 2017. According to The Daily Record, the Board’s advisory group, the Commission on State Debt, has unanimously recommended that the tax rate remain flat – at the same 11.2 cents per $100 value for real property that has been in place for ten years.

Maryland’s Board of Public Works reviews projects, contracts, and expenditure plans for state agencies – many of which have effect on county governments. It meets on alternating Wednesdays and the meetings are open to the public.  The meeting will be held in Governor’s Reception Room on the 2nd floor of the State House in Annapolis.

The Board’s next meeting is scheduled for Wednesday, April 27, 2016 at 10 a.m. Material for the upcoming meeting is available online:

For “frequently asked questions” about the Board’s charge and meetings, visit the Board’s website.

Revised County Costs for Assessments Available Now

After budget actions affected the county costs for supporting the State Department of Assessments and Taxation, a new set of revised costs have been prepared – totaling nearly $22 million. The revision, assembled by the Department of Legislative Services, should help guide counties who are amidst their own budget processes in the weeks ahead.

View the revised county-by-county cost estimates from DLS.

The system of invoicing county governments for assessment and related function for this state department arose during the “great recession,” as the state faced severe budgetary shortfalls. For two years, counties were billed for 90% of these costs – that was reduced to 50%, but has remained at that level since, even as the state fiscal crises have abated.

The change in the figures (from the budget as submitted by the Governor) was due to the General Assembly’s rejection of proposed funds (and authorizing legislation) for aerial assessment technology. Those costs would have been shared with counties under the 50% formula.

 

2016 End of Session Wrap Up: Tax and Revenue – Income Taxes

This post summarizes the status of tax and revenue bills related to the income tax that MACo took a position on or considered during the 2016 General Assembly Session.

checkSubtraction Modifications and Exemptions: HB 227/SB 1166 would provide 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 of the United States, State, or local government.  MACo opposed the bill raising concerns with the fiscal effects of this legislation and the mandatory effect. MACo prefers approaches that provide local autonomy to determine the best way to provide these incentives, rather than those that mandate reductions in local revenue sources.

Final Status: Both bills failed. However, the subtraction modification was amended into the House and Senate tax packages, SB 840 and HB 452. SB 840 failed in conference committee and HB 452 passed third reader in the Senate, but time ran out before further action was taken.

MACo testimony on SB 1166

checkHB 455/SB 387 would increase the personal exemption for individuals 65 and older from $1,000 to $5,000 over four years beginning with tax year 2017. MACo opposed the bill raising concerns with the fiscal effects of this legislation and stated it would prefer approaches that provide local autonomy to determine the best way to provide these incentives, rather than those that mandate reductions in local revenue sources.

Final Status: HB 455 was heard in the House Ways and Means Committee and SB 387 was heard in the Senate Budget and Taxation Committee. No further action was taken on either bill.

MACo testimony on SB 387

checkHB 738/SB 293 would further expand an existing military retirement income tax subtraction modification from $10,000 to $15,000 for military retirees at least 65 years of age. MACo supported the bill with amendments to change it to a credit against the state income tax and give consideration to exploring whether a local option income tax credit is feasible. This approach would preserve local autonomy to determine the best way to provide these incentives, rather than mandate reductions in local revenue sources.

Final Status: HB 738 was heard in the House Ways and Means Committee and SB 293 was heard in the Senate Budget and Taxation Committee. No further action was taken on either bill.

MACo testimony on SB 293

checkHB 1250/SB 841 would provide for a subtraction modification of up to the first $20,000 of nonpassive income that is attributable to a pass-through entity. A pass-through entity is defined as an S Corporation, Partnership, Limited Liability Company or business trust that is not taxed as a corporation, or a sole proprietorship. To be eligible, the pass-through entity and taxpayer must meet several conditions and an income limitation.

MACo supported the bill with amendments to change it to a credit against the state income tax and give consideration to exploring whether a local option income tax credit is feasible. This approach would preserve local autonomy to determine the best way to provide these incentives, rather than mandate reductions in local revenue sources.

Final Status: HB 1250 was heard in the House Ways and Means Committee and SB 841 was heard in the Senate Budget and Taxation Committee. No further action was taken on either bill.

MACo testimony on SB 841 / HB 1250

Collection of Retirement Income Information: HB 1148 would require the Comptroller to collect and report to the General Assembly by January 1, 2018 on the following taxpayer information: (1) amount and sources of retirement income; (2) total Social Security benefits received; and (3) State pension exclusion claimed. This information would be collected through the personal income tax form. MACo did not take a position on this bill.

Final Status: HB 1148 has passed the General Assembly and is being reviewed for the Governor’s signature.

House and Senate Tax Packages Fail: SB 840 and HB 452, as introduced, would have expanded and the Earned Income Tax Credit. As amended by the House and Senate, these bills became vehicles for enacting income tax reductions. The Senate plan, SB 840, would have (1) reduced over five tax years, State income tax rates imposed on certain higher income taxpayers; (2) expanded the State earned income tax credit that can be claimed by individuals without qualifying children; and (3) increased over four tax years the value of the personal exemption that can be claimed by taxpayers with federal adjusted gross income (FAGI) of $100,000 or less, or $150,000 or less if married filing jointly. The House plan would have (1) reduced the State’s middle income tax rate from 4.75% to 4.65%; (2) expanded the earned income tax credit that can be claimed by individuals without children; (3) increased the subtraction modification for certain retirement income of law enforcement, fire, rescue, and emergency services personnel (identical to HB 227 above); and (4) enacted single sales factor apportionment in calculating the corporate income tax. The Senate also supported the subtraction modification for law enforcement, fire, rescue, and emergency services personnel.

MACo did not take a position on either bill as introduced or amended.

Final Status: SB 840 failed in conference committee and HB 452 passed third reader in the Senate, but time ran out before further action was taken.