STATE
Recession Has Legislators Claiming No New Taxes in ’09
Legislative leaders in the Maryland General Assembly have repeatedly stated recently that no tax increases will be passed in the 426th Legislative Session that begins on January 14, 2009. Maryland’s two most powerful legislators, Senate President Thomas V. Mike Miller Jr. (D) and his counterpart in the House, Speaker Michael E. Busch (D), have emphasized the unlikelihood of tax increases or new fees, saying their chambers instead would opt to reduce state budgets to reflect shortfalls in necessary resources.
Their proclamations follow discouraging news regarding the state of Maryland’s budget. A Spending Affordability Committee briefing delivered by the Department of Legislative Services (DLS) on November 18 indicated that Governor Martin O’Malley (D) will have to address a $1.2 billion gap between revised revenue projections and the spending levels contemplated in his fiscal 2010 budget. The possibility of significant budget cuts, achieved by mandating government worker furloughs and other measures, make the task of steering O’Malley’s budget through the General Assembly a tough task for Miller and Busch.
The Committee briefing estimated that, to sufficiently cover the cost of government services now supported by taxes, $16 billion is needed. However, despite increases to the income, tobacco, sales and corporate tax rates passed during the 2007 Special Session, DLS says tax collections are down 2.5 percent this fiscal year. Originally, it had estimated that the tax rate increases would supplement tax revenues, an expectation since dashed by the drastically slowed sales resulting from the recession.
The Committee meets again this month to recommend a percentage increase that the Governor should follow when drafting the fiscal 2010 budget. That figure will not be binding on him but, because the Committee is comprised of legislators who will ultimately have to vote on the budget, its recommendation is usually persuasive. Office of Policy Analysis Director Warren Deschenaux has stated that a 6 percent increase would be required to provide the same services that are funded now.
Maryland Business Tax Reform Commission
The Maryland Business Tax Reform Commission was established during the 2007 Special Session to review and evaluate the state’s current business tax structure and make recommendations for changes. The Commission was created as an alternative to passing the combined reporting (corporate tax restructuring) bill opposed by AOBA and other business groups. Policies to be studied include mandatory unitary combined reporting, gross receipts taxes, value added taxes, alternative minimum taxes, and more. The Commission held its first meeting on November 19, 2008; no General Assembly members were in attendance. The Commission will not meet again until May or June, and anticipates meeting monthly thereafter.
Senator Requests Tax Information from State’s Largest 50 Companies
Senator Paul Pinsky (D) is not willing to wait for the Business Tax Reform Commission: he has, instead, requested and received data from the State Comptroller’s Office regarding corporate income tax payments on four different occasions. The response received from the Comptroller to his most recent request prompted the Senator to send a letter to the 50 largest corporations in Maryland, asking that they disclose to him their 2006 corporate tax payment amounts. The Maryland State Chamber of Commerce promptly responded, stating that such a letter from a state legislator is highly inappropriate and those individual businesses should not be coerced into publicly disclosing information that is confidential under state and federal law.
Corporate tax payments in Maryland have significantly increased in the past five years, and businesses paid nearly one-half of the $1.3 billion of tax increases enacted by the General Assembly in 2007. The Maryland Public Policy Institute recently dropped the State from 24th in 2008 to 45th in 2009 in its annual ranking of the State Business Tax Climate Index. The Index ranks states based on taxes that affect businesses and business investment, including the corporate tax, sales tax, property tax, individual income tax and unemployment insurance tax.
Senator Pinsky, however, has long maintained that the largest corporations doing business in the State pay no corporate income taxes. In his letter, he suggested that he was only seeking the information from the companies as a way to remove them from the list of companies who have “failed to pay their fair share” of taxes. He acknowledges that he has no enforcement powers, should a company decline to cooperate. He plans to use whatever information he obtains to gather support for legislation in the 2009 Session that would institute a combined reporting system.
Pre-filed General Assembly Bills Monitored by AOBA
All of the bills originating from Montgomery County listed below are scheduled for a public hearing on December 11, 2008 at 7:00 p.m. in the Executive Office Building, 101 Monroe St., Rockville, MD in the 1st Floor Auditorium. This is the online link to sign up to testify.
MC 906-09 - Montgomery County - Property Tax - Classes of Property and Special Rates
Sponsor: Delegate Carr (D)
MC 906-09, if enacted, would authorize the County to create specific classes of property subject to real and personal property taxation. This bill enables the County to set a tax rate that varies among each designated class of property. Invariably, jurisdictions elsewhere with such authority have used it to create commercial classes with increased rates in order to insulate (voting) single-family homeowners from increases.
MC 918-09 – Montgomery County – Just Cause Eviction
Sponsor: Delegate Mizeur (D)
This bill authorizes Montgomery County and incorporated municipalities therein to recognize and declare a rental housing emergency and, in turn, prohibit evictions without “just cause.” MC 918-09 effectively empowers a tenant to unilaterally renew a lease, regardless of the property owner’s intentions.
MC 919-09 - Montgomery County Employees - Property, Recordation, and Transfer Taxes
Sponsor: Delegate Kaiser (D) on behalf of the County Executive
MC 906-09 would authorize the County to grant a property tax credit on owner-occupied residential real property purchased by a Montgomery County employee after June 30, 2009, and also authorizes a recordation tax exemption for the transfer of residential real property to a County employee. The County Executive’s intent is to aid County employees’ ability to purchase a home in the County. A laudable goal, but AOBA is concerned that the foregone revenues which result only mean pressure to raise taxes elsewhere.
MC 926-09 - Montgomery County - Recordation Tax - Indemnity Mortgages
Sponsor: Delegate Kaiser (D)
MC 926-09 applies the recordation tax to an indemnity deed of trust, also known as an indemnity mortgage, in the same manner as if the guarantor were primarily liable for the guaranteed loan. AOBA opposes this legislation because it will hinder loan transactions, increase costs to consumers and further aggravate Maryland’s economic climate.
PG 401-09 - Prince George’s County - Green Businesses - Tax Credits
Sponsor: Aisha Braveboy (D)
PG 401-09 authorizes Prince George’s County to grant a property tax credit on real or personal property owned or leased by a certified “green business.” The bill defines a “green business” as one certified by the County and that either: (1) distributes, manufactures, markets, or sells green products, or (2) engages in green practices. AOBA submitted written comments supporting the passage of the bill when a public hearing was held on it in November.
PG 409-09 - Prince George's County - Eviction - Disposition of Personal Property
Sponsor: C. Anthony Muse (D)
PG 409-09 applies to evictions only in Prince George’s County. The bill alters notice requirements by requiring the Sheriff, whenever a judgment is entered in favor of the landlord for possession of leased premises, to: (1) mail the notice by first-class mail at least five business days before the scheduled date of execution or; (2) post on the premises at least two days before the scheduled date of execution. This bill also grants the tenant the right to reclaim any personal property left in the premises within three full days after the date of the eviction. Current law entitles tenants the right to reclaim personal property left in the premises within four hours.
Kratovil Defeats Harris in Hotly Contested Race
Marylanders knew that the 1st Congressional District race to replace Congressman Wayne Gilchrest (R) would be the closest one of this election cycle. When the smoke cleared, Frank Kratovil (D) emerged victorious, if only by a slim margin, defeating State Senator Andrew Harris (R) by just over 2,000 votes. The 1st Congressional District has been represented by Gilchrest since 1991. Kratovil’s victory gives Democrats seven of the state’s eight House seats. Both of Maryland’s U.S. Senators are Democrats.
Kratovil, who is currently serving in his second term as state’s attorney for Queen Anne’s County, was initially the underdog in a district that has voted Republican for all but 14 years since 1959. The race evened out when several members of the Republican Party, including incumbent Gilchrest, refused to endorse Harris and publicly threw their support to Kratovil.
Kratovil’s campaign focused on the economy, the budget, the war in Iraq, the environment and health care. As part of his fiscal platform, Kratovil campaigned on spending reductions and the statutory enactment of a “pay-as-you-go” law intended to prevent Congress from spending money it does not have. Environmentally, Kratovil believes in an aggressive approach to improve the environmental quality in Maryland. Harris will retain his seat in the State Senate and remain on the Education, Health and Environmental Affairs Committee. He is up for re-election in 2010.
MONTGOMERY COUNTY
Concession Fees
After a series of successful meetings throughout the summer and into the fall with County Executive Ike Leggett, County Attorney Leon Rodriguez and Director of Housing and Community Affairs (DHCD) Rick Nelson, AOBA is pleased to inform the membership that the County will discontinue all enforcement efforts regarding the use of concession fees arising anytime before December 1, 2008.
In May, the County Attorney’s Office issued a legal opinion stating the County Attorney's position that the use of certain types of “concession fees” constitutes an illegal late fee and is a violation of both County and State law. This opinion accompanied a letter sent to every multi-family rental housing provider demanding that the housing provider self-report, by affidavit, whether it currently, or had in the past, utilized such concession fees and, if so, to identify and compensate every affected tenant going back three years. Without conceding the legal merits, AOBA strenuously objected to both the policy and enforcement approach the County Attorney's letter embodied.
647 letters were sent out to rental housing providers, and 559 responding firms stated that they did not use concession fees and were thus in compliance with the County Attorney’s opinion. 13 firms acknowledged use of the kinds of concession fees described and refunded money to tenants. Two companies admitted to use of fees, but have not, as yet, compensated the affected tenants. 29 rental companies questioned the legal opinion and have neither admitted to the use of concession fees nor compensated tenants.
The County Attorney made it clear that the County still perceives the practice of identifying one rent as the "market" rent, and then offering a discount off of that rent if the "market" rent is paid by a date which is earlier than the date specified in the lease, violates both State and County law. The County, however, will not enforce this determination for companies that engaged in this practice before December 1, 2008. Most importantly, the County Executive has informed AOBA that, when issues of this nature arise in the future, AOBA will have the opportunity to address concerns with the County before unilateral policy decisions regarding the apartment and office building industries are made.
AOBA Serving on Newly Created Tenant Work Group
On November 12, County Executive Leggett announced the creation of the County’s first Tenants Work Group (TWG), designed to provide renters with an official forum to share their issues and concerns with the County Executive. The TWG is tasked with researching tenant issues and ultimately providing recommendations to the County Executive. Currently, more than a quarter of the County’s population lives in rental properties.
The TWG consists of 15 members, including AOBA, DHCD Director Rick Nelson, State Senator Jamie Raskin (D), County Councilmember Marc Elrich (D), Special Assistant to the County Executive Chuck Short and a number of tenants living in the County. Matt Losak, a Silver Spring resident and President of the Colespring Plaza Tenants Association, was appointed by Leggett to chair the TWG. AOBA was appointed to the TWG in order to help identify concerns and issues facing renters, improve communication lines between renters and housing providers, and generally to work to improve the quality and condition of the rental community.
The TWG is currently working to identify renter issues and organize the structure of the Group. The Group has decided to create five committees, each tasked to investigate and report on a variety of issues. These committees include: (1) Tenant Security and Affordability, (2) Code Update and Enforcement, (3) Landlord-Tenant Communication and Ongoing Tenant Advocacy, (4) Special Needs and (5) Outreach and Education.
The TWG has met three times since October 28; the next meeting will take place on December 9 at 6:30 pm. All meetings are open to the public, and the public has 5 minutes at the conclusion of the meeting to address the TWG.
AOBA Concerns Cause County to Withdraw Fire Inspection Fee Reg
The Montgomery County Fire and Rescue Service (MCFRS) recently agreed to pull back Montgomery County Executive Regulation (MCER) 1-08, Which would significantly increase the amount of the fees charged for inspections, permits, licensing, certificates, data entry, printing, photocopying and other activities.
Many of the proposed fees are increased by 40%, while others are hiked more than 50% over the previous amount. While AOBA recognizes the need for a fully functional fire and rescue service, the fee schedule proposed in MCER 1-08 appears exorbitant and unnecessary in light of the already high level of taxes County businesses and residents pay.
AOBA submitted testimony detailing significant concerns about the increased fees and questioned whether their adoption was fiscally responsible. Historically, AOBA either supports, or takes no position on, tax and fee increases uniformly administered across the County. This time, however, we contested the timing, necessity, and amount of the drastic increases proposed.
As a result of our efforts, MCFRS has agreed to withdraw and re-write the fee schedule, taking into consideration AOBA’s concerns. The new proposed fee schedule should be posted in the December issue of the Montgomery County Register.
Ficker Amendment Passes in Montgomery
Residents of Montgomery County recently approved an anti-tax ballot measure requiring the County Council’s unanimous consent in order to exceed the County’s charter limit on property tax revenue. The initiative, known as Question B, amends the County Charter to require that all nine Councilmembers vote for a property tax increase.
The initiative passed by a slim margin of approximately 5,000 votes, despite the fact that all nine members of the Council urged voters to oppose Question B. Councilmember Valerie Ervin stated that “Requiring a unanimous vote of the County Council to pass the budget each year would enable one Councilmember to hold the entire budget process hostage and this is not how we do business in Montgomery County.” The Council has voted to exceed the Charter limit on property tax revenue four times since voters approved the current limit in 1990, doing so most recently for the FY 2010 budget.
PRINCE GEORGE’S COUNTY
Prince George’s County Residents Reject Increasing Telephone Tax
Voters overwhelmingly rejected a proposal to increase the County’s telephone tax. The initiative would have increased the local rate on land and cell phone bills from 8% to 11%. County Executive Jack Johnson (D) first proposed the tax hike in 2006, seeking to raise $17 million for education, and claimed that this tax was not subject to Tax Reform Initiative by Marylanders (TRIM), a charter amendment that requires voter approval of any change in tax rates. The County Council disagreed, and put the request to increase the tax rate on the ballot.
BI-COUNTY
WSSC Proposed Rate Increase Anticipated in FY 2010 Budget
State law requires that the Washington Suburban Sanitary Commission (WSSC) transmit its proposed budget to the counties by March 1 of each year. The County Executives, the County Councils and their staffs then review the budget and make recommendations. Each County Council may add to, delete from, or decrease an item of either budget and then must transmit it to the opposite County Council by May 15 for its review and concurrence. The Councils must transmit a jointly approved budget to WSSC by June 1. If the County Councils fail to concur in a change with respect to any item by June 1, the failure to concur constitutes approval of the item as submitted by WSSC. Once the Counties' actions have been received, the Commission adopts an approved budget and sets the levels for charges, fees, and taxes to finance approved expenditures. The approved budget then takes effect on July 1.
For budgeting purposes, AOBA members should anticipate a rate increase of 6.5% to 9.5%. In addition to the rate increase, WSSC is expected to request a fee dedicated to replacement of water and sewer mains and other portions of its infrastructure. There has been no indication as yet from WSSC or the Counties indicating what amount of revenue may be sought. |
