By Adam Pagnucco.
In an open meeting tomorrow, the county council will consider placing two charter amendments limiting property taxes on the ballot along with an amendment by Robin Ficker, which has already qualified. Let’s compare the three proposals – Ficker’s, one by Council Member Andrew Friedson and his colleagues on the council’s Government Operations Committee and one by County Executive Marc Elrich – to current law.
What would be limited?
Current charter limit: An annual growth limit is applied to the total dollar volume of real property tax collections.
Ficker: Same as current charter limit.
Friedson: A limit would be applied to the weighted average tax rate on real property.
Elrich: A limit would be applied to the real property tax rate but there is a lack of clarity on which rate. It could apply to the general property tax rate, which all county residents pay. Or it could apply to the weighted average tax rate, which includes both the general tax and many other smaller property taxes that are specific to function and/or geography. This issue needs to be decided one way or the other if this proposal appears on the ballot.
How would the limit be applied?
Current charter limit: The annual growth in the total dollar volume of real property tax collections is limited to the growth rate in the Washington-Baltimore consumer price index in the previous year. A few categories of property are exempted from this limit (notably new construction during the fiscal year).
Ficker: Same as current charter limit.
Friedson: The weighted tax rate on real property would not be allowed to increase without a unanimous vote of current council members.
Elrich: The property tax rate (whichever option is picked) would not be allowed to increase without a vote of two-thirds (six) of the council members.
Is there a waiver?
Current charter limit: Yes. The limit may be exceeded if all current council members vote to do so.
Ficker: No. The limit on property taxes is absolute (subject to state law).
Friedson: Yes. The limit may be exceeded if all current council members vote to do so (as in current law).
Elrich: Yes. The limit may be exceeded if two-thirds (six) of the council members vote to do so.
Are there disproportionate impacts on different taxpayers?
Current charter limit: No.
Elrich: Yes. The taxable value of owner-occupied residential property would be allowed to increase at a maximum rate of 3% per year. Other types of property would not be subject to this limit.
Who wins and loses under each option?
That depends on who you are and what your interest in taxes is.
People who depend on county services (other than schools) lose the most under the Ficker amendment, which ties the growth in property tax receipts to the rate of inflation. Inflation is low and might even be negative this year. If the Ficker amendment passes, it will raise the possibility that property tax collections will screech to a halt with limited ways to deal with that.
Groups favoring tax increases gain the most from the Elrich amendment because it lowers the threshold of breaking the tax limit from all current council members to two-thirds (six) of the council members.
Homeowners might benefit from the Elrich amendment, which limits annual tax bill growth on their principal residences to 3%. However, council staff pointed out that the average annual growth in residential assessments exceeded 3% only twice in the nine-year period of FY11-19.
Owners of commercial property and renters of both residential and commercial property will be disadvantaged under the Elrich amendment because they won’t get the 3% growth limit that homeowners will. Over time, the tax burden will shift away from homeowners and onto commercial entities and renters – including residential renters. This is exacerbated by the fact that the Elrich amendment makes property tax increases easier as stated above.
For stakeholders in MCPS’s operating budget, the entire discussion is irrelevant. That’s because a change to state law in 2012 allowed counties to ignore charter limits for the purpose of dedicating funding to approved budgets of local school boards. Since state law trumps county charters, no charter amendment can stop the council from passing a dedicated tax for MCPS. The Elrich administration included such a dedicated tax in its recommended FY21 budget but the council opposed it.
Ficker’s amendment looks to be headed to the ballot because it received enough petition signatures to qualify. We shall see what, if anything, the council decides to put on the ballot along with it.