In the letter sent and read by Howard County Executive Calvin Ball to the Howard County Council the following is included:
To minimize impacts to services and employees, the proposed budget includes the use of $7.5 million policy reserve, pending County Council approval of a legislation to allow a temporary use of one-time resources from prior surplus for recurring expenditures. This reserve was created two years ago as a best practice to improve flexibility against unforeseen natural and financial shocks.
The budget also includes $21 million in anticipated new funding from an expected recordation tax rate increase from $2.50 per $500 transaction, currently the lowest among all counties in Maryland (with rates ranging between $2.5~$6.6), pending County Council legislation. While no tax increase is desirable, this move will keep our County on par with peer jurisdictions and is necessary relief in a time of severe fiscal difficulty without impacting most residents or businesses (except those involved in property sales or refinancing). It also helps avoid other tax actions that may impact more tax payers in a more significant way.
Without these two funding strategies above, the County will have to make $28.5 million additional expenditure cuts with severe impacts to education, public safety, health and human services and public infrastructure, or tap into other tax options that may impact tax payers more significantly. With a decrease in revenues, the County still has to fund mandated and non-controllable cost increases (e.g., $10.4 million maintenance-of- efforts growth, multi-million increase in debt service payments for capital projects, and rising healthcare and pension costs), and also must address rising community needs in this difficult economic environment. We already took immediate actions including a hiring freeze and pausing non-essential procurement to maximize savings. However, our fiscal gap remains significant, absent other options.
The key items that stand out to me are:
- Howard County recordation tax rate is currently the lowest among all counties in Maryland (see more in the chart below)
- The “pending County Council legislation” meaning that this will only work if the County Council passes legislation increasing the recordation tax rate
- This will not affect most residents today except those involved in property sales or refinancing
- Without these two funding strategies above, the County will have to make $28.5 million additional expenditure cuts
Here is the latest chart I have on the tax burden by county around central Maryland and showing the state average:
In column 3 you see the “Recordation Tax” amount today for counties around Howard County and the state average.
Here is additional information on the future legislation to be proposed by the County Council:
Councilmembers Rigby and Jones to Introduce Legislation Restructuring Recordation Tax on Real Estate Transactions
Howard County Councilmembers Christiana Rigby and Dr. Opel Jones will introduce legislation in May that would restructure Howard County’s existing recordation tax on real estate transactions in a progressive structure. The recordation tax is a one-time cost paid when real estate is sold to a new owner, typically as part of the “closing costs” of a real estate transaction.
Since 1992, Howard County’s recordation rate has remained the same flat rate of $2.50 per $500 of assessed value. This legislation would adopt a progressive, tiered structure to the recordation rate by lowering the rate on properties valued under $250,000 and proportionally increasing the rate on higher property value brackets.
Revenue from the recordation tax supports the General Fund, which funds the Howard County Public School System, the Howard County Health Department, the Howard County Police Department, and other essential County operations. In light of the COVID-19 pandemic and the anticipated economic downturn, this legislation supports the County’s budget without significantly increasing home-buying costs for the middle class.
The proposed structure is progressive and would leave Howard County with one of the lowest recordation rates on low and middle-priced home sales in Maryland. The highest rate, which would be assessed on properties valued at over $1 million, is capped at roughly 2.2% of the total property value.
The proposed structure is as follows:
The proposed legislation will be pre-filed on April 23, 2020 and will be introduced at the Council’s legislative session on Monday, May 4, 2020 with the FY21 Capital and Operating Budget. Testimony will be accepted at the legislative public hearing on Monday, May 18, 2020. Howard County residents can sign up to testify virtually after May 4 by visiting https://apps.howardcountymd.gov/otestimony/. If you would like to submit your testimony electronically, please email firstname.lastname@example.org.
To read the legislation after April 23rd, visit https://cc.howardcountymd.gov/Legislation.
Councilmember David Yungmann posted the following on social media last evening:
Numerous tax increases are being proposed this year and the spin is already starting. Here’s the Administration’s spin regarding the increase in our recordation tax.
“Recordation Tax rate assumes an increase from the current level of $2.50 for each $500 of value when property is sold and title recorded – the lowest rate among all counties in Maryland, pending County Council approval.”
Yes, we are lower than many counties – those that do not have a transfer tax! When combined with the transfer tax, we are already one of the highest in Maryland without either of the proposed increases. A 50% increase in the transfer tax is also on the table. The combined impact of these two tax increases will tie Howard County with Baltimore City as the most expensive places to buy or sell a home in Maryland..Last year we endured a 35% increase in the fire tax and a 50% increase in the trash fee. Is this going to become an annual occurrence.
No word yet from Councilmembers Walsh or Jung via social media (that I have seen).
Have thoughts…let me know in the comments.