Conduit Street Podcast: Procurement, Property Taxes, & Public Works

On the latest episode of the Conduit Street Podcast, Kevin Kinnally and Barbara Zektick discuss the importance of procurement in county government, review a number of tax bills from the 2018 General Assembly Session, and explain the relationship between local departments of public works and the United States Federal Highway Administration. MACo has made the podcast available through both iTunes and Google Play Music by searching Conduit Street Podcast. You can also listen on our Conduit Street blog with a recap and link to the podcast.

May is Maryland Podcast Month! Visit Marylandpodcastmonth.com for more information.

Listen here:

You can listen to previous episodes of the Conduit Street Podcast on our website.

Useful Links

Previous Conduit Street Coverage: 2018 End of Session Wrap-up: Property Taxes

Previous Conduit Street Coverage: Yellow Lights: Don’t Mess With the Manual

Federal Highway Administration’s Manual on Uniform Traffic Control Devices (MUTCD)

Major Issues & More–90 Day Report Reviews the Maryland Legislative Session

The Department of Legislative Services annual synopsis of the General Assembly’s time in Annapolis provides an update on budget, education, transportation, and health issues addressed in laws that passed – and didn’t pass – in the 2018 Session. 

As described the the Maryland Department of Legislative Services, the 90 Day Report is divided into 12 parts, each discussing a major policy area.

Screenshot 2018-05-07 11.21.35
This chart from the 90 Day Report provides a summary of the State’s K-12 funding from fiscal years 2018-2019.

The areas include, among others (links will take the reader to the start of each sections, though there are other the references throughout the document):

Budget/Fiscal (includes resolving structural budget and addressing federal tax reform)

Business and Labor (includes paid sick leave legislation’s veto override)

Education (includes education funding, school construction, and school safety issues)

Health (includes opioids and cannabis topics)

State Government (covers elections security)

Transportation (includes highway user revenues legislation)

The Department of Legislative Services will release another report, the Effect of the 2018 Legislative Program on the Financial Condition of the State after the Governor has signed or vetoed all bills passed by the General Assembly.

 

 

Baltimore County Hears Budget, Two Post

Two people weighed in at the Baltimore County budget hearing this week – and one was not even a Baltimore County resident. But, that is still two more than spoke last year, Pamela Wood reports for The Baltimore Sun.

Mark Baskervill, a resident of Harford County but head of the Baltimore County Campaign for Liberty, spoke against cost-of-living increases to county employee salaries.

He also called attention to the fact that Moody’s, which rates the County triple A, had recently revised its outlook for county finances to “negative”:

“I would recommend spending cuts rather than increasing the debt to finance whatever programs you’re trying to do,” Baskervill said.

 

Moody’s still gives the county its highest rating of triple-A, but noted that the county faces “mounting challenges” and the need to borrow more money to pay for upcoming construction projects, including schools.

Wood also highlighted on Twitter that the County, in compliance with State law, had to advertise that it was increasing its property tax rate – even though it isn’t. That is because Md. TAX-PROPERTY Code Ann. § 6-308 requires this, right down to specifying the notice language and timeline. If a county will receive increased property tax revenues over the prior year, it must advertise that it is increasing the tax rate, although the rate will stay the same. This part of the law – much like Baltimore County’s existing and proposed tax rate – has been the same for decades.

Hard to Count the Amount of Data in this Local Government Report

The annual Overview of Maryland Local Governments, prepared by the Department of Legislative Services for the General Assembly, also contains a wealth of information for Maryland counties.

The Overview of Maryland Local Governments, Finances and Demographic Information is released in January of each year, but the information can provide a helpful reference throughout the following year, too.

As Research Director of the Maryland Association of Counties, the Overview is the external source that I reference most frequently in response to research inquiries that come to the MACo office.

Sections of the report include:

  • Structure of Local Governments
  • Demographic Indicators
  • Local Government Finances (county and municipal)
  • Tax Rates for Local Governments
  • Local Revenue Growth
  • County Salary Actions
  • Public School Funding and Student Enrollment
  • Local General Fund Balances
  • Balance of State Payments

While some of the information is from the previous fiscal year, the many charts in the report provide an at-a-glance for various demographic and financial factors.  Find one on economic indicators below.

For more information see the complete Overview of Maryland Local Governments, Finances and Demographic Information.

Screenshot 2018-04-30 12.06.41
One of the many charts of included in the Maryland Department of Legislative Service’s 2018 report shows a 1.9% increase in median home prices and a 0.2% decline in unemployment across counties from census and fiscal years 2016 to 2017.

Governor Signs MACo’s HUR Initiative Bill

Governor Hogan signed HB 807/SB 516 -Transportation — Highway User Revenues — Distribution into law on Tuesday, April 24, 2018. These bills codify an important step toward restoration of Highway User Revenues (HUR) for Maryland counties and municipalities. For five years,  FY 2020 through 2024, the bill would increase the county share of Highway User Revenues from 1.5% to 3.2%, with additional funding also supporting Baltimore City and municipal government. It is estimated local government revenues will increase by over $70 million in 2020, significantly aiding local efforts to repair, replace, and maintain county roads and bridges that have suffered or deteriorated in the last several years.

The signing marked a pivotal moment in the almost 10 year journey to restoring local government Highway User Revenues (HUR) since funding was decimated — cut by 90% in 2010 — due to the recession. The share of funds for 23 counties plummeted from nearly $300 million in 2007 to only $40 million today. Baltimore City alone had an 87 percent reduction, nearly $100 million less each year than before the recession cuts. The cumulative loss of local roadway investment since fiscal 2010 was well over $3 billion.

For more information:

MACo to Governor: Please Sign Highway User Revenue Restoration 

MACo’s Letter to Governor Hogan

County Highway User Revenue Breakdown (FY19)

2018 End of Session Wrap-Up: Road Funding

 

SCOTUS on Online Sales Taxes? No Slam Dunk

Yesterday was not only a big tax day for federal income tax filers – it was also a big tax day for the Supreme Court, which heard oral arguments for South Dakota v. Wayfair – a much-followed case by state and local governments across the country which depend on sales tax revenue to fund their public services. The case sought to overturn Quill Corp. v. North Dakota. In Quill, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. The high court decided Quill in 1992, before internet sales became a commonplace occurrence.

In Direct Marketing Association v. Brohl, in 2015, Supreme Court Justice Kennedy stated that the “legal system should find an appropriate case for this court to reexamine Quill.”  Within a year, a number of state legislatures passed legislation in direct violation of Quill, requiring sales tax collection from internet sales platforms in some form or fashion.

The Maryland General Assembly considered similar legislation as recently as 2017 via the Main Street Fairness Act. This session, the Senate passed SB1025, Department of Legislative Services – Study – Sales and Use Tax Collection by Out-of-State Vendors, which would have required the Department of Legislative Services (DLS) to retain an independent consultant to study sales and use tax collections by out-of-state vendors. The bill never made it out of the Rules Committee in the House.

According to the State & Local Legal Center, South Dakota’s new law was the first ready for Supreme Court review.

Some thought that the case was a slam dunk for state and local governments which depend on sales tax. Unfortunately, yesterday’s line of questioning from the justices proved otherwise.

South Dakota Attorney General Marty Jackley, backed by the attorneys general from 42 other states, argued the case. According to SCOTUSblog, he was quickly peppered with questions.

Justice Sonia Sotomayor:

I’m concerned about the many unanswered questions that overturning precedents will create a massive amount of lawsuits about… How much contact is enough to justify placing this obligation on an out-of-town seller?…. What happens when the tax program breaks down, as it already has for the states who are using it, and merchants can’t keep track of who they’ve sold to?

Chief Justice John Roberts:

The suggestion in some of the briefs is that this is a problem that has peaked in the sense that the bigger e-commerce companies find themselves with physical presence in all 50 states. So they’re already covered. And the work-arounds that some of the states have employed are also bringing more [sellers] in. And if it is, in fact, a problem that is diminishing rather than expanding, why doesn’t that suggest that there [is] greater significance to the arguments that we should leave Quill in place?

Justice Elena Kagan:

From this court’s perspective, the choice is just binary. You either have the Quill rule or you don’t. But Congress is capable of crafting compromises and trying to figure out how to balance the wide range of interests involved here.

Justice Samuel Alito:

As things stand now, it seems that both the states and internet retailers have an incentive to ask for a congressional solution to this problem… There are incentives on both sides. But if Quill is overruled, what incentives do the states have to ask for any kind of congressional legislation?

Justice Ruth Bader Ginsburg came across more friendly to the tax collectors:

How about going back to the very basic issue? The assertion is that asking an out-of-state seller to collect tax on goods shipped in-state discriminates against interstate commerce. But, as I see it, why isn’t it, far from discriminating, equalizing sellers. That is, anyone who wants to sell in-state, whether an in-state shop, an out-of-state shop, everybody is treated to the same tax collection obligation. All who exploit an in-state market are subject to the in-state tax. Why isn’t that equalizing rather than discriminating?

Justice Stephen Breyer showed no cards:

When I read your briefs, I thought absolutely right. And then I read through the other briefs, and I thought absolutely right. And you cannot both be absolutely right.

Governing highlights other concerns expressed from the Justices:

They also raised concerns about whether states other than South Dakota would try to retroactively charge online retailers for the sales tax they didn’t impose in the past. Jackley said that 38 other states (of the 45 with sales taxes) have already asserted that they wouldn’t apply the taxes retroactively.

And several justices wondered whether Congress would be better equipped to deal with the issue, rather than the high court, because the federal lawmakers could better craft a nationwide scheme that would address many of the judges’ lingering concerns.

A decision is expected by late June 2018.

Baltimore City Council Unifies Over Recordation Tax Increase

The Baltimore City Council is considering raising the City’s recordation and transfer taxes to pay for affordable housing.

By raising the City’s 1.5 percent transfer tax to 2.1 percent and the recordation tax from 1 percent to 1.4 percent, the Council hopes to generate approximately $20 million for an affordable housing trust fund approved by the voters in 2016. Currently, that fund has no dedicated funding source.

Every City Council member has signed onto City Council Bill 18-0221 as a sponsor or co-sponsor, including the President – suggesting that the bill has a strong chance of passage. Owner-occupied properties would be exempt from the tax increase; buyers of residential properties can be exempt if they attest in writing that they will live in the property for at least seven of the 12 months following the purchase.

The Baltimore Sun covers the story.

 

 

Maryland’s Tax Reform Response: County Impacts

The 2018 session is complete and with it, any changes to Maryland’s tax code for the next year. Over the session, the General Assembly made few changes to state and local income tax collections. However, those changes may be significant for county budgeting purposes.

Prior to any enactment of significant income tax changes at the state level, the Comptroller’s Office estimated that local income tax revenues would increase by an estimated $255.0 million in fiscal 2019 and $199.0 million in fiscal 2020, as a result of federal tax reform. A significant portion of that revenue gain is due to the shift in taxpayers who will now claim the standard deduction.

Bills passed by the General Assembly which subtract from the original estimate include:

  1. Senate Bill 318House Bill 570, which alter the value of the standard deduction beginning in tax year 2018 by increasing its maximum value from $2,000 to $2,250 for single taxpayers and from $4,000 to $4,500 for taxpayers filing jointly. Beginning in tax year 2019, the value of the standard deduction is indexed based on the annual change in the cost of living. MACo estimates that altering the value of the standard deduction will decrease county income tax revenues by $34.0 million in fiscal 2019, $26.5 million in fiscal 2020, $29.8 million in fiscal 2021, $33.24 million in fiscal 2022, and by $36.9 million in fiscal 2023.
  2. Senate Bill 996, as well as House Bills 296 and 327, expand the existing military retirement income tax subtraction modification by increasing from $10,000 to $15,000 the maximum amount of retirement income deductible from Maryland adjusted gross income. In order to qualify for the increased subtraction modification, the individual must be at least 55 years old. The bills also expand the existing subtraction modification for retired “hometown heroes” by extending eligibility to correctional officers.  Local income tax revenues are expected to decrease by $4.3 million in fiscal 2019 and by $4.7 million in fiscal 2023.
  3. House Bill 96 (Ch. 36) creates a subtraction modification for up to $7,500 of the qualified expenses incurred by a living organ donor.  Local revenues are expected to decrease by $13,000 in fiscal 2019 and by $16,000 in fiscal 2023.
  4. House Bill 43 creates a subtraction modification for up to $50,000 earned from the sale of a perpetual conservation easement on real property
    located in Maryland.  Local revenues are expected to decrease by $110,100 in fiscal 2019 and by $135,200 in fiscal 2023.
  5. House Bill 1069 increases to $7,000 the value of the subtraction modification for qualifying volunteer fire, rescue, or emergency medical services personnel – but not until fiscal 2021. Local revenues are expected to decrease by $332,000 in fiscal 2021 and by $663,000 in fiscal 2023.
  6. House Bill 671 creates a subtraction modification of up to $250 for classroom supplies that are purchased by an elementary or secondary classroom teacher.  Local revenues are expected to decrease by $588,000 annually beginning in fiscal 2019.

Income Tax Legislation - County Effects

BillWhat It DoesWhat It Earns (Costs) (FY19) (millions)What It Earns (Costs) (FY20) (millions)
TOTAL$216$167.38
Federal Tax Cuts and Jobs Act of 2017 Overhauls federal tax code$255
$199
SB 318 & HB 570Increases standard deduction & indexes to cost of living($34)($26.5)
SB 996; HB 296 & 327increases subtraction modification for military retirees and retired correctional officers($4.3)($4.4)
HB 96creates subtraction modification for organ donors($0.013)($0.014)
HB 43creates subtraction modification for sales of perpetual conservation easements($0.110)($0.115)
HB 1069increases subtraction modification for volunteer fire/EMS00
HB 671creates subtraction modification for classroom supplies($0.588)($0.588)

For a wealth of information regarding what happened this legislative session, including regarding income taxes, see the Department of Legislative Service’s 90 Report.

Round-up of the 2018 Session for Counties

MACo’s legislative efforts earned an 80% success rate – and as usual, the counties’ voice makes a difference in Annapolis. Bills we support are more likely to pass, and bills we oppose are more likely to fail.

2018 Legislative Results Infographic

MACo’s legislative initiatives, priorities, and positions are directed by its Legislative Committee. This body comprises elected representatives from all of MACo’s members – the 24 county jurisdictions (including Baltimore City).

The “one county, one vote” system of deciding the Association’s legislative strategies, ensures that all counties have an equal voice. All 24 jurisdictions participated regularly in the weekly meetings throughout the session – where they also engaged with policy leaders and advocates who joined the meeting to address county leadership.

Our policy staff have compiled updates and results on all of the bills the Legislative Committee decided to take action on this year.

For the 2018 End of Session Wrap-up for each subject MACo covers, click below:

2018 End of Session Wrap-Up: Assessments and Taxation

2018 End of Session Wrap-Up: Business Affairs

2018 End of Session Wrap-Up: Disparity Grants

2018 End of Session Wrap-up: Economic Development Tax Credits

2018 End of Session Wrap-Up: Education

2018 End of Session Wrap-Up: Elections

2018 End of Session Wrap-Up: Employee Benefits & Relations

2018 End of Session Wrap-Up: Environmental Legislation

2018 End of Session Wrap-Up: Finance and Procurement

2018 End of Session Wrap-Up: Government Liability & Courts

2018 End of Session Wrap-Up: Health & Human Services

2018 End of Session Wrap-Up: Housing & Community Development

2018 End of Session Wrap-Up: Intergovernmental Relations *MACo Initiative Area*

2018 End of Session Wrap-Up: Parks & Recreation

2018 End of Session Wrap-Up: Pensions

2018 End of Session Wrap-Up: Planning & Zoning

2018 End of Session Wrap-Up: Property Taxes

2018 End of Session Wrap-Up: Public Information & Ethics * MACo Initiative Area *

2018 End of Session Wrap-Up: Public Safety and Corrections

2018 End of Session Wrap-Up: Road Funding * MACo Initiative Area *

2018 End of Session Wrap-Up: School Construction * MACo Initiative Area *

2018 End of Session Wrap-Up: State Budget & Fiscal Affairs

2018 End of Session Wrap-Up: Tax Sale Bills

2018 End of Session Wrap-Up: Transportation and Public Works

2018 End of Session Wrap-up: Wynne Tax Bills

2018 End of Session Wrap-Up: County Tax Revenues

2018 End of Session Wrap-Up: Other Tax Bills

2018 End of Session Wrap-up: Economic Development Tax Credits

An overview of MACo’s work to promote tax policies that enhance economic development in the 2018 General Assembly. 

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

One Maryland Economic Development Tax Credits

Push Icons-WON

MACo successfully supported a bill which generally streamlines and simplifies the One Maryland Tax Credit, making it easier to access for businesses and improving economic development opportunities in our counties. Senate Bill 989/House Bill 1295 simplifies the One Maryland Economic Development program into one credit instead of two, allows businesses to claim credits during their first year in the program, reduces fiscal uncertainty of outstanding credits, and makes the program available to new businesses, among other changes. The legislation has passed the General Assembly and is awaiting the Governor’s signature. Bill Information | MACo Coverage

For more information on tax and revenues legislation tracked by MACo during the 2018 legislative session, click here.