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Lowering Tax Rate

Dear Editor:

I am responding to your editorial in the Calvert Independent on Wednesday, May 24, 2006 titled “Something County Leaders Can Do.” In the editorial, you suggest that the County Commissioners can “help by lowering our tax rate.”

First, are you and your readers aware that the Calvert County Commissioners extended the Maryland Homeowner’s Tax Credit to provide significant and real property tax relief to those most affected by rising assessments in Calvert County? Under the state plan, up to the first $300,000 in assessed value of a primary residence can receive a credit depending on income and family size. Under the Calvert County extension of the state plan, a homeowner of a primary residence with an annual income of $50,000 or less and a net worth of $200,000 or less excluding the value of the principle residence and excluding the value of any retirement assets like IRA’s and 401K’s from the net worth calculation, can qualify for a tax credit on the first $400,000 of assessed value of the primary home. Only one application has to be filled out, the state application, and the value of the credit will be calculated for both the state credit against state property taxes and the county credit against county property taxes. I encourage everyone who may qualify to apply. The application deadline for this tax year is October 31, 2006.

This extension of the Maryland Homeowner’s Tax Credit benefits those families whose income has remained stagnant as property assessments have increased, those on fixed incomes below $50,000 per year, and those who have low incomes and less than $200,000 in assets excluding their primary home value and retirement plans. It is a commitment to those who have the least resources to cope with the rising assessments.

Are you also aware of the new accounting rule (GASB 24) that goes into effect in FY2008 (one year from July1, 2006) called the OPEB rule for short? OPEB stands for Other Post Employment Benefits. According to the new OPEB standard, total other post employment benefits must be put on the bottom line of governmental entities like states, counties, and municipalities on July 1, 2007 rather than just the current value of the benefits. These benefits include retiree pensions and health benefits. Calvert County reacted to this ruling proactively for county government by funding the first 3 years of this new requirement in the FY2007 budget year that will begin on July 1, 2006. The difference was $2.2 million annually, going from $500,000 per year in current value to $2.7 million annual value, a total of $6.6 million in additional liability in the budget. For example, when corporations were required (previously) to make this conversion, many either went into bankruptcy re-organizations and turned their retirement plans over to the federal government, like the airlines did, or took other drastic steps like GM to curtail their retirement benefit plans. So how does this affect the taxpayer of Calvert County?

The Board of Education for Calvert County is also required to put the total OPEB benefits on their bottom budget line. Even though the state pays teacher pensions in Maryland, the local jurisdiction pays for teacher health benefits, as negotiated in the teacher contract by the elected Calvert County Board of Education. Until the last teachers’ contract, about 2 years ago, when changes were negotiated, health benefits for Board of Education retirees were generous. Because the Board of Education funding comes from federal, state, and county taxpayer funds, and because most of the BOE budget goes to salaries, the Board of Education (BOE) does not have millions of dollars of excess funds lying around to cover the total OPEB costs as compared to the current value of the retiree health benefits. That money will have to come from the county budget.

How many millions of dollars are we talking about? I don’t know. That’s right: the amount is unknown. The formulas for calculating total OPEB benefits are so complex that an actuarial firm must arrive at the amount, which is being calculated at the present time. I had hoped to receive the figure from the BOE by May 1st, but the actuary is still calculating.

The ultimate point is that I would like to vote to reduce everyone’s tax rate right now. To do so would be irresponsible, because I do not yet know the final budget figures while awaiting the OPEB calculation for the BOE.

You mention in the editorial that the towns of Chesapeake Beach and North Beach were able to reduce their tax rates. The main difference between the towns and the county is that the towns do not have significant industrial infrastructure. When the county tax rate is decreased, it is, by law, not just reduced for residents, but also for industrial giants like Constellation Energy and Dominion LNG.

In summary, while I would like nothing more than to vote to reduce the property tax rate for Calvert County residents, a rate which has not been increased since 1987 and which remains one of the lowest in the state, I must wait to receive the impact of the OPEB calculations for the BOE, and I have to weigh the long term effects of the reduced tax liability for business infrastructure, decreasing the commercial tax base that helps to offset the residential tax base. I would also like to mention that the amusement tax for Calvert County has been lowered from 10% to 1% in this budget.

A politically expedient move would be to lower the property tax rate in an election year, then to raise it next year to cover the cost of the BOE OPEB benefits. I am not interested in that kind of political expediency. I will await the OPEB calculations for the BOE and I will keep searching for responsible ways to make all our tax burdens less. I am committed to keeping taxes as low as possible and to curb spending over which I have a vote.

If you have ideas you wish to share on this topic, please contact me at the Courthouse at shaws@co.cal.md.us or at 410.535-1600 ext.2205 or at 175 Main Street, Prince Frederick, MD. 20678. All suggestions are welcome.

Sincerely,
Susan Shaw, Calvert County Commissioner