Dear Neighbors:
This coming week the City Council will have two meetings. On Monday, May 2 we’ll have the last of our special budget sessions. This meeting will be devoted to our budget reconciliation process, in which we’ll make decisions on changes to the proposed Fiscal Year 2023 budget (which begins on July 1) and the property tax rate. The final votes on the budget and property tax will occur in our May 11 and 18 Council meetings, but there are generally few changes made after the reconciliation session. I’ll be participating remotely in the reconciliation meeting.
Then on Wednesday, May 4 we’ll have a regular weekly Council meeting. That meeting won’t directly address the Fiscal Year 2023 budget and property tax rate, though it will include a vote on a budget amendment for the current fiscal year, which is inter-connected to the FY 23 budget.
The agenda information for both meetings can be accessed through these links:
May 2 Budget Reconciliation session: https://takomaparkmd.gov/meeting_agendas/city-council-meeting-agenda-monday-may-2-2022/
May 4 Regular Council meeting: https://takomaparkmd.gov/meeting_agendas/city-council-meeting-agenda-wednesday-may-4-2022/
On May 4, in addition to the budget amendment referred to above, the agenda includes a resolution authorizing temporary street closures in support of the 2022 Old Takoma Business Association event calendar, as well as work session discussions on procurement of a Police Department vehicle and on design plans for the Community Center renovation. You can see details on those agenda items via the above May 4 meeting link. I’ll share my views on those matters, along with the usual community announcements, COVID updates, etc., in a separate blog prior to Wednesday’s meeting.
For both meetings, in order to provide public comments in-person, go to the Community Center auditorium at 7:30 PM. To make comments remotely, use the above links to register no later than 5:00 PM on the day of each meeting. You can watch both meetings on City TV (RCN -- 13, HD 1060; Comcast/xfinity -- 13, HD 997; Verizon Fios -- 28), on the City Council Video Page; on YouTube, or on Facebook.
BACKGROUND ON MAY 2 BUDGET RECONCILIATION SESSION
On April 6 the City Manager submitted his proposed budget for Fiscal Year 2023, which begins July 1. In his presentation he stated that the budget is largely maintenance of effort, with any budget increases generally reflecting a return to pre-pandemic levels of service. As I’ve stated before, I agree with that approach, given that the worst of the pandemic is now seemingly winding down. And in that connection, most of the major new spending in the proposed budget comes from Federal ARPA monies, which -- while part of the City budget -- aren’t funded through our local property tax.
Even so, the City Manager’s budget proposal does call for a substantial increase in the property tax -- 3 cents higher per $100 of properties’ assessed value. With many properties seeing significant increases in their recent re-assessment, that rate hike could mean homeowners would potentially be paying hundreds of dollars more on their tax bills, depending on their assessments. So a key goal for me at Monday night’s reconciliation session will be to seek reductions in spending that enable us to bring down the proposed rate at least to its current level, and ideally lower.
The proposed budget calls for a property tax increase from the current rate of $0.5397 per $100 of assessed value to $0.5697. For a property valued at $600,000, the current .5397 rate produces a City tax bill of $3,238, and the proposed rate of .5697 results in a tax of $3,418, an increase of $180. But that’s if there’s no change in the assessment. As noted above, many residents are seeing significantly assessment increases. This interactive map gives a sense for the level of change in the recent re-assessment: https://r.takomaparkmd.gov/property/property-tax-map-points.html.
If the assessment for that same $600,000 property rose by 30%, with the maximum 10% of the increase allocated in the first year, then the tax increase would be $324 under the current rate, and $522 with the proposed new rate. Years 2 and 3 would see further increases. And of course, the $600,000 value referred to above is for illustrative purposes. Many properties are already assessed well above that level, and they would face correspondingly higher tax payments. And I would add that this is only the City property tax rate — property owners also pay the County property tax. The proposed County budget calls for keeping its rate the same, but again that could mean higher tax payments for property owners depending on their reassessments.
The magnitude of tax hike in the proposed City budget would become increasingly difficult for many residents to be able to afford, especially those who are retired, or who have lower or fixed incomes. And even though there are no doubt residents for whom the increased payments would be manageable, I don’t think it’s the direction we should be going, especially as we emerge from the pandemic. There are large economic forces putting upward pressure on housing costs throughout the greater Washington metropolitan area. If we want to keep the City reasonably affordable, it’s crucial in my view to, among other steps, do what we can to hold the line on tax increases. Again, to me that means at a minimum keeping our rate the same.
In this year’s budget each one cent increase in the tax rate is equal to $267,000. So if the Council agrees to net budget cuts of that amount, the tax rate can be reduced by one cent. Cutting expenditures by three times that amount, or a net of $802,000 in savings, would bring the tax rate back to the current level. The Constant Yield Rate -- the rate calculated by the State to produce the same overall amount of revenue in the next fiscal year as in this one -- is .5195. That’s roughly another two cents lower than the current rate, meaning further net reductions of hundreds of thousands of dollars would be needed to get to that level. And even at Constant Yield, some residents would still face increased tax bills depending on their reassessments.
I’m optimistic we’ll be able to at least bring the proposed tax rate back to its current level, and I’ll be supporting and/or proposing spending reductions on Monday night aimed at achieving that goal. As I mentioned in last week’s blog, I don’t know whether we can get below the current level and closer to Constant Yield, though I’ll be exploring additional reductions to move us in that direction.
As always, I welcome comments or questions about the issues covered in my blog.
Peter Kovar, Takoma Park City Council, Ward One
240-319-6281; www.councilmemberkovar.com
(He, Him, His)
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