gaithersblog.net

The relevant proposed legislation is House Bill 1256. Given the budget situation in the State and in the various counties in the State, this hardly seems the time to be making it easier for people to cheat on their property taxes. Not that, like, there would be a good time. You can find contact information for your State legislators here.

Timothy B. Wheeler writes in the Baltimore Sun, Officials rethink home tax law:

Last year, convinced that landlords and owners of second homes were claiming tax breaks they didn’t deserve, legislators unanimously passed a law requiring all Maryland homeowners to apply for a valuable tax credit that they’ve gotten more or less automatically until now.

Since December, though, state lawmakers have been peppered with questions and complaints from homeowners about the new application requirement.

Now, they’re considering calling the whole thing off.

[…] in Montgomery County, one of a handful where rental homes have to be registered, officials checked the list a few years ago and found 2,700 improperly claiming the credit.

Statewide, budget analysts have estimated that if 2 percent of property owners are claiming the credit improperly, local governments might be missing out on $10 million a year in property tax revenue. The state, which also levies a small property tax, would miss out on $700,000 a year.

But that 2 percent estimate is just hypothetical, officials acknowledge. The percentage of improperly claimed credits - and the amount of taxes dodged - might be higher.

• Kathleen Miller writes, Enrollment soars in Montgomery County adult English classes
  

  Enrollment in Montgomery County adult English classes for immigrants has jumped about 34 percent since the county spent nearly half a million dollars to reduce massive waiting lists in the past year.

• Kathleen Miller writes, Montgomery committee approves legislation to increase closing costs for those buying homes
  

  Under the bill approved 2-1 by the Management and Fiscal Policy Committee, home-buyers and sellers would see recordation taxes increase from their current level of $6.90 per $1,000 paid for a home to $8.50 per $1,000, if their homes cost $600,000 or less.

• Courtney Mabeus writes, Staph infection spreads further through Montgomery County public school system
  

  A virulent strain of staph infection spread further into Montgomery County’s Public Schools this week with officials reporting five more cases Monday, bringing the total to 19.

From the City’s website. The property tax “increase” is not particularly surprising. The tax rate is not changing — it hasn’t changed in decades — but the projected revenue is going up as a result of increased assessments. This is really just SOP for the City.

Notice - Proposed Real Property Tax Increase Hearing, 5/14/2007

Posted 4/24/2007

CITY OF GAITHERSBURG
31 South Summit Avenue
Gaithersburg, Maryland 20877

Telephone: 301-258-6330

CITY OF GAITHERSBURG NOTICE OF A PROPOSED REAL PROPERTY TAX INCREASE

The Mayor and City Council of the City of Gaithersburg proposes to increase real property taxes.

1. For the tax year beginning July 1, 2007, the estimated real property assessable base will increase by 11.9%, from $7,024,512,135 to $7,857,471,366.

2. If the City of Gaithersburg maintains the current tax rate of $0.212 per $100 of assessment, real property tax revenues will increase by 11.9%, resulting in $1,765,874 of new real property tax revenues.

3. In order to fully offset the effect of increasing assessments, the real property tax rate should be reduced to $0.190, the constant yield tax rate.

4. The City is considering not reducing its real property tax rate enough to fully offset increasing assessments. The City proposes to adopt a real property tax rate of $0.212 per $100 of assessment. This tax rate is 11.6% higher than the constant yield tax rate and will generate $1,765,874 in additional property tax revenues.

A public hearing on the proposed real property tax increase will be held at 7:30 p.m., May 14, 2007, at City Hall, 31 South Summit Avenue, Gaithersburg, Maryland 20877. The hearing is open to the public, and public testimony is encouraged. Persons with questions regarding this hearing may call 301-258-6310 for further information.

Also from the City’s website, to be heard on the same night:

Notice - Budget Public Hearing, 5/14/2007

Posted 4/24/2007

CITY OF GAITHERSBURG
31 South Summit Avenue
Gaithersburg, Maryland 20877
Telephone: 301-258-6330

NOTICE OF A PUBLIC HEARING

Pursuant to Section 41 of the Charter of the City of Gaithersburg, Maryland, the Mayor and City Council of the City of Gaithersburg will hold a public hearing on:

MONDAY

May 14, 2007
7:30 P.M.

or as soon thereafter as it can be heard in the Council Chambers at City Hall, 31 South Summit Avenue, Gaithersburg, Maryland, for the purpose of receiving written and oral comments from the public concerning the proposed annual budget for Fiscal Year 2007-2008.

All interested persons, citizen groups, and organizations are encouraged to attend the hearing and submit comments.

Under the proposed budget, the property tax rate for the City of Gaithersburg remains at $.212 per $100 of assessed value.  Additionally, the ad valorem tax on tangible personal property subject to taxation by the City shall remain at the rate of $0.53 per $100 of assessed value.  Generally, the proposed budget is summarized as follows:

REVENUE
Local Taxes                                       $19,157,000

Licenses and Permits                              2,084,640
Intergovernmental Revenue                   13,688,098                 
Service Charges                                      4,149,470                             
Fines and Forfeitures                                  373,500

Miscellaneous Revenues                          7,425,635

Anticipated Revenue                            $46,878,343
Reappropriation                                       3,524,398
TOTAL                                               $50,402,741

EXPENDITURES
General Government                               $8,970,243
Public Safety                                             9,834,766
Public Works                                            7,290,972

Parks, Recreation & Culture                      8,540,468
Community Services and Development       2,052,049
Miscellaneous                                            2,130,039

TOTAL OPERATING EXPENDITURES             $38,818,537

CAPITAL IMPROVEMENTS
TOTAL CAPITAL IMPROVEMENTS                 $11,584,204
TOTAL PROPOSED EXPENDITURES                $50,402,741

Copies of the proposed budget will be available May 7, 2007, at City Hall, 31 South Summit Avenue, Gaithersburg, Maryland, during regular business hours Monday through Friday, 8 a.m. to 5 p.m.

David B. Humpton
City Manager

• Margie Hyslop writes: Local bills await governor’s signature

  Among the bills passed by the General Assembly and needing Gov. Martin O’Malley’s signature to become law are measures that would:

  *Prohibit Montgomery County from levying a special property tax on residents of Gaithersburg, Rockville and Washington Grove for maintenance and use of county parks, recreation facilities and programs.

  Montgomery and Prince George’s County Councils and the Maryland-National Capital Park and Planning Commission, which runs the two counties’ parks and programs, would be required to issue a report to the state legislature that analyzes user fees for parks and related services in the counties and municipalities. The municipalities, which operate their own parks and programs, argued that their residents should not be taxed twice.

• Chris Robinson writes: Still time to comment on absentee ballot availability

  The revision would allow absentee ballots for city elections without providing a reason. The Ad Hoc Election Participation Advisory Committee and Board of Supervisors of Elections suggested the revision during a public work session in March.

• Sebastian Montes writes: Goshen homes nearing historic status

  ‘‘When we came through a couple years ago, this place was in ruins,” said Joanne Atay, vice-chairwoman of the Goshen Historical Preservation Society, which has been pushing the county for years to grant the Black and White Inn historical status.

  They marvel at its greatly restored state. But the immediate thrill is overshadowed by the deep relief from their years of work finally bearing fruit: the Black and White Inn, along with three other homes in Goshen, could at last win the protections of historical designation as early as this summer.

  Those four Goshen homes would be the first African-American homes to be individually added to the historical atlas created in 1976.

Louis Llovio writes in the Maryland Daily Record:

Maryland state senators will take up a measure this week that would allow cities to charge a 1 percent tax on hotel rooms.

If passed, the tax could be levied only by incorporated municipalities that don’t get a share of their county’s occupancy tax. Only cities in six counties — Carroll, Frederick, Harford, Montgomery, Somerset and Washington—would have that option.

This would suggest that, for example, Annapolis would already be getting some of the hotel tax money from Anne Arundel

Montgomery County has a 7 percent tax on hotel rooms but it does not share it with the two cities [Gaithersburg and Rockville], which border on Washington, D.C.

Unsurprisingly, the hotel industry doesn’t think much of the idea, but not everyone is swayed:

“What we’re trying to do is attract businesses and visitors to our hotels,” he said. “This [tax] will dissuade bigger groups from coming.”

“Come on,” said Del. Kumar P. Barve D- Montgomery the bill’s House sponsor. “If a biotech is looking to come to Montgomery County, then a 1 percent charge is not going to stop them from coming.”

Plus, he said, there is a way for Rockville and Gaithersburg hotels to avoid the issue altogether: Have the county share its revenue.

According to the article, the measure has already passed the house.

The City has published it’s Legislative Priorities for the 2007 session of the Maryland General Assembly. These are the things that, given their druthers, the City would have the legislature pass in the upcoming session. Key issues in here are:

• Yet more money for the Lakelands aquatic center
• More funding for the City police
• Funding for major transportation projects, specifically the CCT and the Watkins Mill Interchange
• Taxing authority issues: Exemption from the Metropolitan District Tax, authority to levy additional Hotel/Motel and Development Excise taxes
• Authority for a municipalities to be opt-out electrical aggregators. On the Takoma Park website, I found a PDF document from 2005 discussing this issue in detail. A couple of quotes from this document will go a long way toward explaining what they want to do:
  

  What is electricity deregulation?
  Generally, electricity deregulation refers to a state deciding that customers should be allowed to choose an electricity supplier by letting competition enter a market where only a regulated utility monopoly existed before. It is felt that the market forces of supply, demand, and competition will help to keep electricity costs low, and stimulate innovative new products and services that didn’t exist under regulation. Maryland began this process in 1999.

  So if there is supposed to be a choice of suppliers, why can’t we find any besides our existing utility?
  What has been found in every state where restructuring has been tried, including Maryland, is that competition only appears for large industrial customers. This is because electricity suppliers who try to recruit individual homeowners and small businesses quickly learn that the marketing expense is much too high per customer to make it worth their while, and they abandon the effort.

  What exactly is municipal aggregation?
  Aggregation in general refers to many customers joining together to form a buying group. Municipal aggregation refers specifically to the situation where a municipality organizes the pooling of its citizens to become the buying group. The municipality (or a group of them) then seeks out offers on behalf of its constituents to get a better price, terms and services than would be available to an individual.

  What is the “opt-out” part?
  If a municipality has to go out and recruit citizens to join the buying group (i.e. getting them to “opt-in” to the program), then just like when a business tries to do it, it is prohibitively expensive in time and money. Where aggregation can be successful is when it is allowed to be done another way using the so-called “opt-out” approach. This allows the city to publicly declare its intention to become an aggregating entity for its citizens through hearings and mailings, and all citizens are then included in the buying group unless they respond to the mailings or otherwise tell the municipality they wish to “opt-out” of the program.

  There’s a lot more detail in that document, but I think that this gives a pretty good idea of what’s going on. The document explains that forming such a buying group, where people would belong unless they explicitly bother to request exclusion, is not currently legal in Maryland; the proposed legislation is the thing that would make it legal to do this. It also asserts that the electrical utilities — PEPCO in particular — are opposed to this because it would force them to be more competitive.

Anyway, what follows is the complete text of the City’s 2007 legislative agenda, as posted on their website:

City of Gaithersburg State Legislative Priorities for 2007
Posted 12/27/2006

FUNDING

Regional Aquatic/Recreation Center - Bond Bill Needed for Construction

• Additional funding is needed to move forward with this project on Route 28 and Edison Park Drive that will serve both City and County residents.
• The project is now in design phase.
• Gaithersburg has committed $9.5 million.
• Montgomery County has committed $6 million.
• Crown Farm project developers have committed $5 million.
• $1 million bond bill is requested in the 2007 legislative session so we can move to the construction phase.

Police - State Aid Requested to Improve Public Safety

• Maryland provides $1,800 in state aid for each sworn municipal police officer. This figure has not increased since 1999.
• Additional state assistance is necessary for Gaithersburg to expand its force, which currently stands at 49 sworn officers.
• The Maryland Municipal League has made increasing this aid a key component of its legislative agenda.

TRANSPORTATION

Watkins Mill Road Interchange - Engineering Funds Need to be Increased

• The Watkins Mill Road Interchange at I-270 is critical.
• It will aid economic development and reduce congestion at one of the busiest intersections in Montgomery County
• The City and County are working with developers on the Watkins Mill Road extension.
• Gaithersburg recently approved a Road Participation Agreement that would provide for build-out in two years.
• Gaithersburg has secured 65% of the Interchange right-of-way at no cost to the state. Efforts are underway to secure the rest.
• The Interchange is in the engineering phase, but there are not adequate engineering funds earmarked for this project in FY 2008.
• The proposed Consolidated Transportation Plan only calls for $800,000 and the Department of Transportation notes that an additional $7.8 million is needed for engineering.

Corridor Cities Transitway - Make a Top Funding Priority

• Congestion on I-270 has reached intolerable levels.
• The Corridor Cities Transitway (CCT), which is supported by municipalities along the route, provides an effective light rail alternative to commuters.
• The entire right-of-way throughout the City of Gaithersburg is available for construction, and the land for the transit stations has been set aside.
• This project needs to be the next major transportation initiative in Maryland.

LEGISLATION

Metropolitan District Tax - Exempt Gaithersburg and Rockville

• Gaithersburg requests a Bi-County bill establishing that properties annexed into the City of Gaithersburg or City of Rockville since 1965 not be subject to the Metropolitan District Tax.
• This tax is used to support parks operated by the Maryland National Capital Park and Planning Commission.
• It has never been assessed on properties located within Gaithersburg or Rockville, but a recent County Attorney’s opinion has determined that properties annexed in either City should be subject to the tax.
• Both Gaithersburg and Rockville have their own extensive parks systems and recreational programs that are funded by the respective City’s property tax revenues.

Hotel/Motel Tax- Allow Municipalities to Assess

• The City of Gaithersburg currently has 14 hotels operating within City limits.
• They require additional public services such as police protection.
• Gaithersburg requests that enabling legislation be approved allowing municipalities to assess a 3% hotel/motel tax.
  
• Most counties and the City of Baltimore currently charge a hotel/motel tax, but other municipalities do not have the authority to assess a tax of this nature

Municipal Opt-Out Electrical Aggregation- Approve

• Deregulation has not produced meaningful competition in Maryland, and our residents’ electric utility rates continue to increase.
• Like municipalities across this State, the City of Gaithersburg would like to seek competitive bids from electric providers on behalf of our residents.
• We are requesting that the General Assembly approve municipal opt-out electrical aggregation this year.

Development Excise Taxes- Enact Enabling Legislation

• The City of Gaithersburg is supportive of Rockville’s request for enabling legislation that would permit municipalities to charge development excise taxes to assist in providing the infrastructure necessary to support new development

Jaime Ciavarra of the Gazette writes in the article Residents could pay hundreds more in park tax,

Gaithersburg leaders are questioning a tax that would require 80 percent of Gaithersburg households to pay hundreds of additional dollars to the Montgomery County park system.

The levy, called the metropolitan district tax, would affect any city properties that are on land annexed into Gaithersburg since 1965, including major communities such as The Kentlands, Lakelands, Quince Orchard Park and Washingtonian Woods.

It amounts to more than 19,000 Gaithersburg homes.

Krista Brick, writing in the most recent Town Courier, quoted David Humpton’s letter to the County:

I am extremely concerned about this issue and I would ask you to immediately put it on hold until such time as Montgomery County, Gaithersburg and Rockville officials can convene a meeting to discuss all aspects of this issue.

This tax was passed by the Maryland General Assembly in 1965. As I understand it, the law allowed the County to tax properties in the County but not in an incorporated municipality such as the City of Gaithersburg. The intent of the tax was to help fund County parks. However, Gaithersburg was quite a bit smaller in 1965, and the County is now claiming that properties which were annexed into the City since 1965 still have to pay the tax. At about six cents per one hundred dollars of assessed value, the tax would amount to two or three hundred dollars for a typical single family house in the City. The City is, I’m happy to hear, taking issue with this plan.

One aspect that the Gazette article doesn’t go into — possibly because no one knows the precise numbers — is how much money this could mean for the County. To estimate this, I did some rough calculations. According to the City’s FY2007 Budget, the City projects revenue from property tax of about $14.2 million. The relevant tax rate is $0.212 per $100 of assessed value, or 0.212%. Back-calculating, this would imply an assessed tax base of about $6.7 billion. According to the Gazette article, about 80% of the properties in the City would be affected by this tax. 80% of $6.7 billion is about $5.3 billion. Of course the assessed values are probably not evenly distributed throughout the City, so this is a very rough estimate, but it is also the case that some of the newest, most valuable properties in the City are in newly-annexed parts of the City. Thus it could be argued that this $5.3 billion might be, if anything, low.

As the metropolitan district tax is levied at a 0.057% rate, the annual revenue from $5.3 billion worth of properties would be about $3 million. This is, I think, an interesting figure. One possible way to look at it is that it would be sufficient to recover, within two years, the County’s $6 million contribution to the Lakelands Aquatic Center. I suppose that money has to come from somewhere. Perhaps the County is thinking that a good place to get it from would be Gaithersburg…

Updated: Another way of looking at this is using the figure quoted in the Gazette that this tax could affect more than 19,000 homes. According to CNN/Money,
the median home sales price in Gaithersburg is $365,000. And according to Maryland’s State Department of Assessments and Taxation, properties in Montgomery County are typically assessed at around 93% of what they would sell for, which in this case works out to about $340,000. 0.057% of this number is about $193. Now I understand that this is an invalid use of a median, but 19,000 homes at $193 each would bring in about $3.6 million. Typically a median will be lower than an average, however, because the home prices will be bounded below but not above. On the other hand, if the 93% ratio the State is listing is for full assessments, that figure will be high compared to taxable assessments because of the 10% phase-in rules. In any event, this calculation comes out with a result that is of the same order of magnitude as my first calculation.

Which, to tell the truth, bothers me a bit. It bothers me because the first calculation was based on an estimate of the entire tax base of the City of Gaithersburg, which includes commercial properties. The second calculation is based on residential properties (”homes”) only. If anyone has better numbers or a better way to calculate this, I’d like to hear about it.

Articles of interest in the current issue of the Gaithersburg Town Courier:

• KCA Hires Engineer to Assess Flooding
  The KCA has hired Gardener James Engineering, Inc. to assess the flooding problems in Kentlands.
• City Wards Off New Tax for Now
  This is regarding the proposed Metropolitan District Tax. I’ll have a separate post on this later.
• Developers Debut Crown Farm Details
  This is also on my to-post-about list.
• Election coverage
  There are multiple articles on the upcoming KCA election, including candidate profiles. There is also a brief item about the upcoming, uncontested Lakelands election.
• City Council Endorses Day Laborer Site
• Gaithersburg Blogger Brings City Politics to the Web
• Editorial
  The Courier defends their news coverage and editorial content.
• Letters
  • Richard Arkin takes issue with the Courier’s coverage of the activation of the districting provision and questions the Courier’s impartiality.
  • Ann Strain expresses disappointment with the conduct of the September 27 KCA BOT meeting.

The Town Courier is available for free in stands at various locations in Kentlands, Lakelands and Quince Orchard Park. Most of their articles are not published on the Web.