Commissioners Receive Budget Briefing
Originally Published: January 29, 2024
Emerging Choice: Raising Taxes, or Not Meeting Needs
Chief Financial Officer (CFO), Jeanette Cudmore, gave the Commissioners a budget briefing last week, which included an overview of tax rates, funding needs, and revenue projections. According to a Memo prepared by Cudmore, “revenues for FY2024 are projected to be down by $7.2M and the projections for FY2025 have an estimated increase to revenues.” A notable part of the revenue decrease for FY24 is related to property tax credits.
John Houser, Deputy County Attorney, described in a memo how the Sergeant First Class Heath Robinson Honoring our Promise to Address Comprehensive Toxics Act, or the “PACT” Act signed by President Biden in 2022, made it “easier–apparently far easier–to qualify as service-connected conditions certain ailments possibly stemming from exposure to…environmental hazards.” This increased the number of disabled veterans who qualify for a 100% property tax credit. In her own Memo, CFO Cudmore wrote this reduced the County’s property tax revenue by “approximately $3.1M” while noting that unlike other states, Maryland “has no limitations to the credits.” Meeting documents also showed the number of 100% disabled veterans in the County approved by the State for the tax credit increased from 226 to 955. That’s just .008% of the County’s population.
The subject was raised by Commissioner Hewitt back at the January 9th Commissioner Meeting as well. Hewitt said he had spoken with Senator Jack Bailey about an idea of putting a cap on the veterans tax credit, using a property value of $393K. According to Hewitt, homes with a much higher value are not being charged property tax if the owner has the credit. While he supports the tax credit, Hewitt said “when somebody says you’re 100% disabled, here is this intuitive idea that you cannot do what you used to do. But that does not apply in this case, these vets can continue to work full time” even with certain health conditions. Commissioner President Guy, a veteran himself, said he supports the idea of a property value cap but Hewitt said Senator Bailey did not.
Overall, residential and commercial property values have increased from a total of $5.18B in 2021 to $6.52B in 2024, a 26% increase. More property owners have begun participating in the Homestead Tax Credit, something heavily promoted by the Commissioners. Set at 3% for the County and 10% for the State, this credit limits the increase in taxable assessment each year. When your property value increases 25%, if you are enrolled for the tax credit you only pay a 3% increase and 10% increase to the County and State, respectively. St. Mary’s Homestead Tax Credit rate is the third lowest in the state. Increasing the rate would bring in additional revenue.
Maryland’s Department of Legislative Services identifies St. Mary’s as a wealthy county, according to Cudmore. I reviewed data provided during her presentation which showed a pattern of Commissioners methodically lowering the income and property tax rates over the past twenty years. There was only one year, in 2020, when the Commissioners voted to increase the income tax to finance increased needs from the community across various departments. But in 2022 (an election year) and 2023, as COVID relief funds from the federal government filled County coffers, the income tax rate was lowered again.
A chart prepared by the Finance Department shows potential revenue generated from increasing the income and property taxes. Raising property taxes by one penny would net $1.53M, or an average of $201 more per household (HH); raising by 8 cents (to match Calvert) would net $12.1M, or $466 more per HH; raising by 16 cents (to match PG) would net $23.4M, or $745 more per HH; and raising by 30 cents (match Charles) would ned $45M.1, or $1,283 more per HH. The current income tax rate is 3%. Raising it to 3.05% would net $1.88M, or $43 more per HH; to 3.10% would net $3.77M or $87 more per HH; to 3.15% would net $5.66M, or $130 more per HH; and to 3.2% would net $7.55M, or $173 per HH.
Again, these are just examples to show the Commissioners what is possible. “With our low rates, the County has much flexibility to cover increased expenditures,” CFO Cudmore writes. Commissioner Hewitt said he didn’t see a way to increase revenues without raising taxes but didn’t believe there was political will for that. The Commissioners are in a tough spot because, as their CFO made clear, there are upwards of $20M in additional funding needs or requests this year. The Commissioners used $14M in fund balance last year to cover funding for Nonprofits, Capital Improvement Projects, financing the Emergency Services Billing Fund, and the Emergency Services Support Fund. “Funding for these items will need to be supported by other revenues in FY25,” states Cudmore’s memo.
Comments made by Commissioner Colvin at past meetings suggested there may be no nonprofit funding granted from the County this year. That would be a shame because, to a large extent, nonprofits are primarily addressing addiction, homelessness, victim and survivor services, and many other wrap-around services needed by those who are struggling. In many cases, County Department’s refer people to non-profits for help.
Reminder–there is a Commissioner Public Forum tomorrow, January 30th, at 6:30PM.
