Montgomery officials say they may need to raise the county’s property tax rates in order to close a projected budget gap of about $401 million for the next fiscal year.
The county’s charter bars increases in revenue collected from property taxes beyond the rate of inflation, unless seven of nine council members vote to override the charter limit. The council has voted to exceed the limit three times since the rule took effect in fiscal 1992.
“Obviously when you’re looking at a $401 million gap, you’ve got to somehow bring that down to zero,” Patrick Lacefield, spokesman for County Executive Ike Leggett, told The Examiner. “He isn’t ruling [increasing property tax rates] in or out.”
Leggett has asked all county government departments to shave 2 percent off their operating budget this year in anticipation of what is projected to be the largest-ever budget gap for the county. Lacefield said Leggett would prefer to achieve savings through “efficiencies.”
Council Member Marc Elrich agreed raising property taxes beyond the county’s charter limit “is possible.”
Elrich said he would prefer to review existing programs before making blanket cuts to all programs.
“I firmly believe in programs, but you need them to be effective. You can’t just say you’re spending money if it isn’t effective,” Elrich said. “Everything needs to be on the table at this point.”
Current revenue estimates for the county are about $178 million lower than previous estimates for the upcoming year. Leaders attribute much of the deficit to a “slowdown in the county’s real estate market” that is expected to result in $71 million less for county coffers from transfer and recordation taxes, both of which are associated with home sales. County officials are also expecting $107 million less from income taxes than they anticipated.
Elrich andLacefield said officials are also concerned the county may face some cuts to services from the state, after the legislature asked for a $500 million reduction in state aid due to the state’s own budget crisis.
“This is something that we may see more of in Maryland as we go forward,” said Kim Rueben, public finance economist with the Urban Institute. “The housing market slowdown could make this a question for many county and local governments to figure out: How [will they] raise the money they need, or will they rethink how they look at revenue versus spending?”
