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Budget amendments could rescind recordation tax hike

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Ahead of a looming budget vote, three Howard County Councilmembers filed legislative amendments that would trim more than $90 million from the capital budget and $21 million from the operating budget.

On the operating side, the cuts stemming largely from unfilled personnel costs and reduced contractual services would make the county’s recordation tax increase sponsored by Councilmembers Christiana Rigby (D-Dist. 3) and Opel Jones (D-Dist. 2) unnecessary.

Council Chair Deb Jung (D-Dist. 4) and Councilmembers Liz Walsh (D-Dist. 1) and David Yungmann (R-Dist. 5) introduced the amendments one week before the Council’s scheduled budget vote.

Rigby and Jones favored changing the county’s recordation tax from a flat rate of $2.50 per $500 of sale price to a progressive, tiered structure.

Under that proposed structure, the county would charge $2 on each $500 up to $250,000; $5 for the $250,001 to $500,000 tier; $8 for the $500,001 to $1 million tier; and $11 for properties exceeding $1 million.

Capital Reductions

Yungman, Jung and Walsh proposed reducing capital funding for some projects by half or slightly more.

Among the larger reductions are: $4 million for systematic facility improvements; $3.6 million in Pay-Go funding for road resurfacing; $1.5 million for Detention Center renovations; $1.1 million for police station revitalization; and $1 million each for technology infrastructure, public safety enhancements, and the sidewalk repair program.

By far the largest funding adjustment is a $61.6 million reduction in bond funding for the proposed Downtown Columbia Cultural Arts Center.

“That’s a lot of money in a year when we’ve got more than 26,000 people unemployed and we know we’re going to have decreased income tax revenues,” said Jung.

Moreover, she said, the Center’s current design has changed drastically since conception and would now require nearly $4 million in operating costs as a facility run by the Department of Recreation and Parks.

“I don’t think most people realize the full financial picture of what it will take to ultimately get this Cultural Center built and managed,” Jung said.

Pushing the project back a year would give the council more time to become informed about the Center, she added, and might make it more affordable in the long run.

Unintended Consequences

During a May 18 virtual public hearing, the only support for the recordation and transfer tax measures came from the Howard County Board of Education (BOE) and the PTA Council of Howard County.

“I’m just happy to see there is an increase as opposed to no increase or a cut,” said Mavis Ellis, BOE Chair.

Yet while 25 percent of the transfer tax is earmarked for Howard County Public School System capital projects, there is no guarantee that even a portion of recordation tax revenue would necessarily find its way to the school system.

Many in the development and real estate industries argued that the measures could unintentionally harm the county in the long term.

Bruce Harvey, president of Williamsburg Homes, said small county-based developers would incur the tax on indemnity deeds of trust, while larger multi-state developers could borrow against properties outside of Maryland to avoid the same tax.

“This … would increase our building costs by 1.7 percent, and a $20 million office building would increase by $340,000,” said Larry Maykrantz, president of St. John Properties. “[That] cost is ultimately passed down … and would increase our tenants’ rent by 1.7 percent. It’s very important to keep in mind that 90 percent of our tenants are small businesses.”

The higher tax rate could also adversely affect the investment returns generated by large-scale commercial developers.

“I’m going to have a hard time attracting pension and retirement funds that are investing in us instead of investing in the market,” said David Finch, general counsel for Columbia-based Corporate Office Properties Trust.

Difference of Opinion

In its response, the Streets for All Coalition advocating for complete streets in Howard County termed the budget amendments “draconian.”

“The cuts include nearly $4.5 million in funding for projects to improve bike and pedestrian infrastructure, more than half the funding requested by [the] County Executive,” the Coalition wrote in a statement issued by The Horizon Foundation. “[P]roposed cuts to road resurfacing projects that are critical for bike improvements bring the total number of cuts to our infrastructure to $9 million.”

Yungmann, however, said the amendment’s sponsors were careful not to cut anything that would make it harder to provide services during the pandemic response.

“A lot of money we took out was leftover money from prior appropriations … and there were very few capital projects that are ready to advance that we [targeted for cuts],” he said. “People are going to act like we dug really deep and created austerity, we didn’t.”

Councilwoman Rigby did not respond to The Business Monthly’s request for comment on this story.

“Mr. Yungmann, Ms. Walsh and I … are aligned in thinking we really need to take a fiscally conservative outlook this coming year and not base a balanced budget on speculative revenues,” Jung said. “Listings in the month of April were down 45 percent, and that’s as much as we have to go on right now. I think the better part of valor this year is to be safe rather than sorry.”

By George Berkheimer | Senior Writer | The Business Monthly

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