{"id":12327,"date":"2020-03-19T14:13:03","date_gmt":"2020-03-19T18:13:03","guid":{"rendered":"https:\/\/www.theseventhstate.com\/?p=12327"},"modified":"2020-03-19T14:13:11","modified_gmt":"2020-03-19T18:13:11","slug":"county-screw-up-led-to-tax-hike-proposal","status":"publish","type":"post","link":"https:\/\/www.theseventhstate.com\/?p=12327","title":{"rendered":"County Screw-Up Led to Tax Hike Proposal"},"content":{"rendered":"\n

By Adam Pagnucco.<\/em><\/p>\n\n\n\n

Buried in the fine print of County Executive Marc Elrich\u2019s recommended FY21 operating budget<\/a> is a shocking revelation: the executive claims that a mistake made by county revenue estimators two years ago has caused tens of millions of dollars in losses for the county.\u00a0 One reason why the Elrich administration is proposing a tax hike now is to recover that money.<\/p>\n\n\n\n

To understand what happened, we have to understand how the county\u2019s charter limit on property taxes functions.\u00a0 Here is the exact text of the charter limit<\/a>.<\/p>\n\n\n\n

Unless approved by an affirmative vote of all current Councilmembers, the Council shall not levy an ad valorem tax on real property to finance the budgets that will produce total revenue that exceeds the total revenue produced by the tax on real property in the preceding fiscal year plus a percentage of the previous year\u2019s real property tax revenues that equals any increase in the Consumer Price Index as computed under this section. This limit does not apply to revenue from: (1) newly constructed property, (2) newly rezoned property, (3) property that, because of a change in state law, is assessed differently than it was assessed in the previous tax year, (4) property that has undergone a change in use, and (5) any development district tax used to fund capital improvement projects.<\/em><\/p>\n\n\n\n

In plain English, what this means is that the county\u2019s\nreal property tax receipts (with a few exceptions) may not rise at an annual\nrate exceeding inflation unless the entire council votes to exceed it.<\/p>\n\n\n\n

Calculating the charter limit involves three basic steps.\u00a0 First, one must estimate the value of the assessable base subject to the charter limit.\u00a0 Second, one must calculate the value of the many property tax credits<\/a> offered by the county.\u00a0 Third, one must calculate the levels of real property tax rates that, when applied to the assessable base and taking account of the credits, produce an increase in receipts equal to the rate of inflation.<\/p>\n\n\n\n

Hence, estimating the size of the assessable base is\ncritical.  If it is underestimated,\nproperty tax rates will be set too high and the charter limit will be\nviolated.  If it is overestimated,\nproperty tax rates will be set too low and the county will not collect as much\nrevenue as it could at the charter limit. \nThese are extremely technical considerations but this affects tens of\nmillions of dollars (at least) for the county budget.<\/p>\n\n\n\n

In his recommended budget, the county executive makes\nthis statement:<\/p>\n\n\n\n

I am proposing this supplemental tax rate this year to partially offset an unexpected underperformance of the property tax for the last two years. In preparing the FY19 County budget, the taxable property base of the County was overvalued. As a result, the property tax rate needed to generate revenues at the Charter limit for the past two years was set too low. This resulted in lost revenues of $80 million, now permanently embedded in our revenue projections.<\/em><\/p>\n\n\n\n

The amount of revenue lost by this mistake was $35\nmillion in FY19 and $45 million in FY20. \nBecause of compounding, the lost revenue will rise each year unless it\nis recovered.<\/p>\n\n\n\n

It\u2019s important to note that Elrich was not yet the county\nexecutive when the FY19 charter limit was estimated.  That was done by the finance department in\nformer County Executive Ike Leggett\u2019s last year.<\/p>\n\n\n\n

Must the losses be stanched?\u00a0 The county usually allows property tax receipts to rise up to the charter limit each year, but there is nothing in county law requiring that.\u00a0 For example, in FY13, Leggett recommended level-funding of property tax receipts<\/a>, which actually kept them below the charter limit.\u00a0 The amount of forgone revenue was estimated at $26 million that year, which would have risen in subsequent years.\u00a0 However, this was not the result of an estimation mistake.\u00a0 The county had doubled the energy tax two years before and had not sunset it as was promised<\/a>.\u00a0 Forgoing a bit of property taxes was something of a consolation.<\/p>\n\n\n\n

This issue must be frustrating for all concerned.  County leaders have a choice.  They can live with the mistake and move on.  Or they can tell voters, \u201cWe screwed up and\nnow we need to raise your taxes.\u201d<\/p>\n\n\n\n

If option number two is selected, how do you think folks\nwill respond to that?<\/p>\n\n\n\n

Dear reader, if you are someone who is considering\nrunning for office someday, remember this story.  Something terrible could happen to you when\nyou run.<\/p>\n\n\n\n

You could win!<\/p>\n","protected":false},"excerpt":{"rendered":"

By Adam Pagnucco. Buried in the fine print of County Executive Marc Elrich\u2019s recommended FY21 operating budget is a shocking revelation: the executive claims that a mistake made by county revenue estimators two years ago has caused tens of millions of dollars in losses for the county.\u00a0 One reason why the Elrich administration is proposing … Continue reading County Screw-Up Led to Tax Hike Proposal<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[151,84,132,134],"tags":[1545,1508,1539],"class_list":["post-12327","post","type-post","status-publish","format-standard","hentry","category-adam-pagnucco","category-marc-elrich","category-property-taxes","category-taxes","tag-adam-pagnucco","tag-marc-elrich","tag-taxes"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p4mKJE-3cP","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/12327","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12327"}],"version-history":[{"count":1,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/12327\/revisions"}],"predecessor-version":[{"id":12328,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/12327\/revisions\/12328"}],"wp:attachment":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12327"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12327"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12327"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}