Dear Neighbors:
Here’s a link to the agenda for the May 11 City Council meeting: https://documents.takomaparkmd.gov/government/city-council/agendas/2016/council-agenda-20160511-rev.pdf. The only votes will be connected to the budget and the property tax rate, and given their complexity, I am limiting my comments to those issues in this email.
BUDGET OVERVIEW
During last week’s Council meeting, we voted on a series of budget issues, and approved a new local tax rate. This process of voting on changes to the initial proposed budget (which you can see here: https://documents.takomaparkmd.gov/government/finance/budgets-and-financial-documents/proposed-budget/FIN-20150401-proposed-budget-fiscal-year-2017.pdf) is known as Reconciliation. We still have to take formal votes this week and next week, but the basic details of the budget and tax package are now set.
My goals were to preserve existing service levels, increase funding for several priority areas, and hold down property tax rates. I’m pleased that we will be increasing investment in key areas like affordable housing, economic development, youth programs, addressing Montgomery County tax duplication, stormwater management projects, and the police pension system. I would have preferred a lower tax rate than where we ended up, but I lost a couple of votes in Council that would have helped to further reduce the rate
TAX RATES
The City Manager’s budget called for retaining this year’s property tax rate of $0.585 per $100 of assessed property value. We also had under consideration the Constant Yield Rate, the rate at which the same amount of total revenues would be raised in the coming year through the local tax as under the current rate. That rate is $0.5518 per $100 of assessed value. We ultimately approved a tax rate of $0.5675, a little below the halfway point between the current rate and Constant Yield.
SPENDING CUTS AND INCREASES
The gap between the current rate and Constant Yield is $697,000, meaning that we can start to get closer to Constant Yield if we lower total net spending below that amount.
I supported a set of increases and cuts that, taken together, had the potential to get us close to Constant Yield. To be specific, I backed the Mayor’s proposal for $400,000 for affordable housing, and modest additional expenditures for the Folk Festival, the proposed scholarship fund, two additional Play Days, a parent advocacy program, and expanded hours for the Community Center multimedia lab. Those items together totaled $440,000 in new spending.
I supported offsetting those increases through bond financing for the Ethan Allen Gateway project and the Flower Avenue Green Street, which would reduce spending by $580,000. In addition, I was not supportive of the new environmental enforcement position (which would save approximately $150,000), preferring to advance those goals through education and outreach. Other Reconciliation savings I favored included $97,000 in health care savings, $93,000 by eliminating the Exterior Home Repair program, $35,000 by holding off on the residents survey, and reducing our budget reserves by another $100,000. Those reductions add up to $1,055,000, and when combined with the $440,000 in new spending, would have produced a net reduction of $615,000. Though that wouldn’t have completely covered the $697,000 gap needed to reach Constant Yield, it would have gotten us almost 90 percent of the way there.
However, my colleagues didn’t share all of my priorities. Several of the spending cuts mentioned above were adopted, but I was outvoted on the proposal to eliminate the environmental enforcement position, and the Council also added over my objections an additional $100,000 for the economic development initiative. In addition, I proposed a successful cut of $55,000 in the reserves, but we couldn’t get the full $100,000 reduction without dipping below a prudent reserve level. As a result, the net reduction in Reconciliation was about $300,000 less than I had sought. That change produced the final tax rate just under the mid-point between the current rate and Constant Yield, as opposed to getting nearly 90 percent of the way there, as I had hoped.
While I regret that on some key issues my fellow councilmembers had different opinions on the best way forward, I’m pleased with the increase in affordable housing and some of the other areas where we’ll be devoting more resources.
TAX IMPACT ON RESIDENTS
For a home with an assessed value of $500,000, the Constant Yield Rate would have meant a City tax bill of $2,759, and the rate we actually approved will produce a bill of $2,838, an annual difference of $79. Properties that saw increases in their assessed values will face somewhat higher tax bills. However, the State spreads the property tax increase over a three year period, and in Montgomery County, if you have a Homestead Credit and your new assessment increased by more than 10%, your annual taxable assessment is capped at 10%. There is also a credit for lower income homeowners known as the Homeowners Tax Credit. Montgomery County and Takoma Park provide additional credits to residents who have the Homeowners Tax Credit (the Takoma Park credit is automatic – no application is required). You can check here for details: http://dat.maryland.gov/realproperty/Pages/Maryland-Homestead-Tax-Credit.aspx.
NEXT STEPS
The Council will cast votes on the budget and tax package tomorrow night, and then again on May 18. As usual, there will be a public comment period at the beginning of the Council sessions, and I encourage those concerned about any of these issues to offer their opinions.
Please also feel free to contact me directly with any questions or comments.
Peter Kovar, Takoma Park City Council