Council Keeps Taxes to Charter Limit

Council Keeps Taxes to Charter Limit

Approves $3.05 billion operating budget for Fiscal Year 2006.

“They said it couldn’t be done.”

The opening sentence of written statement by County Councilmember Nancy Floreen was a resounding refrain at a council meeting May 20 to approve a $3.05 billion county operating budget that reduces property taxes to the limit set in the County Charter. The council could set taxes higher than the limit with a vote of seven out of nine members, as they have done for the past three years.

Councilmembers voted unanimously to approve the budget, which will provide $296 in property tax relief to the average county homeowner while increasing spending by 7.7 percent over last year’s budget.

Councilmembers’ statements preceding the vote had a congratulatory tone following a sometimes contentious budget season in which agreement on spending and tax measures at times seemed out of reach.

“We did fight hard but we fought fair,” Council President Tom Perez (D-5) said about what he described as a “morally and fiscally responsible” budget.

Perez is the first among four newcomers to the council in 2002 to serve as council president. He received uniform praise from colleagues for his leadership during the budget process.

“Ten days ago I wouldn’t have given you a plug nickel for our chances of being where we are today and a lot of the credit goes to our president Tom Perez,” said Councilmember Howard Denis (R-1), who represents Potomac, Bethesda, and Chevy Chase.

The approved BUDGET, which takes effect July 1, trims $53 million in spending from the budget proposed in March by County Executive Doug Duncan, and more than doubles the tax relief Duncan proposed.

Duncan had proposed a property tax rate reduction of 2 cents per $100 of assessed value as limited across-the-board tax credits and targeted relief. The council budget doubled to 4 cents the rate reduction and added a $116 tax credit that all homeowners will automatically receive. It also expanded the “circuit-breaker” tax credit for lower-income homeowners. Under a proposal by Councilmember Steve Silverman (D-At Large), homeowners making less than $55,000 per year can apply for a tax credit against the first $300,000 of assessed value of their home. Homeowners eligible for the circuit-breaker credit would average of $900 of total tax relief.

The tax cuts followed widespread outcry from residents facing sharp increases in their property tax assessments. Potomac was part of one-third of the county reassessed for 2005 and saw assessments rise 70 percent.

Councilmembers expressed dismay that rising property tax bills are not only keeping needed middle-income workers like teachers and firefighters from settling in Montgomery County, but forcing some existing residents out.

“This is not a one-time issue,” said Councilmember Marilyn Praisner (D-2), who said she was saddened that a friend was forced out of the county by tax increases tied to increasing home values and assessments. “We’ll be back same time next year facing the same challenges.”

“To basically double the property tax relief that was presented to us a few months ago and to do it without raising another tax, that was critical,” Denis said. Denis said his support of the budget hinged on dropping a proposal to cut property taxes while raising the energy tax. That proposal, advanced by Councilmember Phil Andrews (D-3) died during revenue deliberations May 19. Andrews supported raising the energy tax because it affects businesses three times more than homeowners, but Denis had called it a “shell game.”

Among the cuts from Duncan’s proposed budget were $8 million in school funding and more than $2 million in arts grants. But councilmembers stressed that all of the “cuts” are only reductions to proposed increases. For example, the budget funds hiring 34 new police officers, while the police department had asked for more than 50. Montgomery County Public Schools will receive $100 million more than it did in Fiscal Year 2005.

Duncan criticized the council budget in a statement. “We can — and must — do better,” he wrote, criticizing the council for borrowing $32 million from the capital budget to help fund the tax cuts. Duncan said the move would cost taxpayers $13 million in interest and is “bad public policy.”

Councilmembers said that with interest rates at historic lows, taking out bonds to free up cash for needed tax relief is fiscally sound.

Several councilmembers said they hoped that the council would work more closely with the executive and county departments in the coming year to align priorities going into next year’s budget season.

“We are still looking at the frosting and we are not at all probing the cake,” Perez said.

In opening remarks, Perez railed against the state and federal government for cuts that are trickling down to counties. He said that analysis of the budget process has focused too much on political maneuvering and overlooked the “structural transformation” that is squeezing county budgets.

“We are trying to pick up the slack for the trail of broken promises from Annapolis and Washington,” he said. “Deficits are being outsourced to local governments. Responsibilities that used to be federal responsibilities are devolving to local governments in the name of tax relief.”

Denis made similar comments in an interview.

“We’re squeezed by the state and federal government not giving us the resources that we need and deserve. We’re squeezed by the lower levels of government, the municipalities … who push the services up to us,” he said. “It all falls on us. There’s no on else for us to pass it off to. That’s really the bottom line.”