The budget ball is in the commissioners’ court now. I would like to review Maryland’s property tax system so everyone will understand what is happening and has happened in the past. Some of you know, but I suspect many of you do not.
Each February the Maryland Department of Assessments and Taxation sends to each county a constant yield tax rate that will produce the same amount of property tax revenue as the county received in the previous year. Each county can use that rate or set a different rate if it thinks it will need more or less revenues. Each county sets the actual rate usually by May and then the tax bills go out in July.
So let’s look at the past and what has happened with property tax revenues since that is a primary source for the funding of our schools. When Commissioners Gouge, Minnich, and Zimmer left at the end of 2010, they left the county with property tax revenues at their peak of $225,424,800 and the school system well funded.
The new commissioners came in under the new system of 5 commissioners from 5 districts at the beginning of 2011 just as property values began to drop as the Great Recession wave came through the county. If the new commissioners had followed Maryland’s property tax system as it is designed and adopted the constant yield tax rate each year, the county would have continued to receive $225,424,800 in revenue each year and your individual tax bill would have remained the same as it was in 2010 each year thereafter. The schools would have remained well funded. There would have been some belt tightening because of inflation and a drop in state contributions to the county, but school employees would not have missed those 5 or 6 step increases, we would not have lost experienced teachers to other counties, and redistricting and the school utilization problem could have been considered without the funding pressures that have existed for the past 5 years. 5 monkeys as commissioners could have done this simply by using the constant yield tax rates that the state gives the county each year. This is why I put a lot of the blame for the closing of NCHS on the commissioners. It is why I am disgusted and infuriated. It is why every school employee should be, and for that matter every parent should be.
So what would the cost have been to you? As values decreased the constant yield tax rate would have increased from $1.048 per $100 of value (the actual rate in 2010) to about $1.255 per $100 of value in 2014. Property values began to increase again in 2015 and should within another 4 years or so get back to their 2010 values. So the constant yield tax rate would now be decreasing back to the original $1.048 per $100. So if you owned a residence worth $400,000 in 2010, you would have by 2014 on average lost about 18% of its value. As the value went down, the constant yield rate you pay went up and you would have continued to pay the same amount each year as you paid in 2010.
If you have lived in your home since 2010 and will likely live there another 4 years or so, you will not have really lost any value–it was a paper loss, not an out-of-pocket loss. But if the $1.048 per $100 rate had been unchanged and applied against your decreasing value and then increasing value until your 2010 value of $400,000 is recovered, paying the constant yield rate each year instead of $1.048 per $100 would have cost you about $400 a year on average, a few years higher and a few years lower. That’s it and our school system would not now be trashed.
When you are looking at what the commissioners are doing this year with respect to property tax revenues, this is what you should keep in mind. Since the commissioners did not use the constant yield tax rate each year after 2010 and in fact have lowered the actual rate even lower than the $1.048 per $100 that existed in 2010 (when the rate should have been going up instead of down to maintain revenues), we have a new base of $183,036,400 property tax revenues from 2015. Remember the constant yield tax rate is that rate which will produce the same revenues as the previous year. So the commissioners over the past 5 years have pushed that base down from $225,424,800 to $183,036,400, and since property values are now increasing the constant yield tax rate for 2016 will be lower than the actual rate of $1.018 per $100 from 2015, when the rate should be rising to get back to $225,424,800 in a few years.
So the commissioners have starved our county government and CCPS (you may not have realized what was happening, but they certainly knew) and will tell you now they can’t raise taxes, that the constant yield tax rate for 2016 even says they should lower the tax rate. Don’t be fooled by that. Let them know you know what has happened and what should be happening now. To get back to the 2010 CCPS funding level (which is still less because of inflation and reduced state revenues) within 4 more years or so, advocate for the following:
- Raise the property tax rate back up to at least $1.048 per $100, the rate that existed in 2010. If you have a home that was worth $400,000 in 2010 and that may now be worth about $340,000 on average, that will cost you an additional $102 in 2016 but will be an additional $5.5 million to the county.
- Raise the local income tax rate back to at least 3.050 percent that existed earlier from the 3.030 percent in 2015. If your taxable income is $40,000, that will cost you an additional $8 a year but will mean a million or more dollars for the county.
- Increase the percent of total county revenues allocated to CCPS to at least 51.3% (expected in 2016: 50.2%), the percent that was allocated to CCPS in 2010.
Advocate for at least these minimal budget changes and we can get back to a quality school system within 4 to 6 years.