Published: July 18, 2008 01:12 am         

County eyes cut to home tax cap

Finance director says reduction of rate may not be possible now

Allegany County Finance Director Jerry Frantz told the county commissioners Thursday the county might not be able to reduce the Homestead Tax Credit as much, or as quickly, as they originally wanted.

During the budget process from March through May, all three commissioners repeatedly expressed varying degrees of support for lowering the cap on the tax rate of the assessed amount of real property — only of a homeowner’s residence — to 5 percent annually from the maximum allowed amount of 10 percent.

At 10 percent, the county is to realize about $2.4 million in new real estate tax revenue from an anticipated $252 million increase in assessments next fiscal year. With a 5 percent cap, that figure would be $1.16 million in new tax dollars — or $1.2 million less than expected.

The change would affect 17,508 homeowners, or 45.5 percent of the county’s 38,435 taxable accounts. Frantz offered figures for the range of possible decreases from 1 percent to 5 percent.

However, Frantz cautioned Thursday that the real estate tax is the only major revenue source for this year’s budget.

“With the present state of having practically all of the expenditures of the county rising, along with weak revenue growth, we could be in a precarious position,” Frantz said in a detailed report presented during the work session.

Should the commissioners choose to lower the cap at all, Frantz said county officials “should continue or speed up the steps to lower operating costs and enhance other revenues for the upcoming (fiscal 2010) budget” to prevent “adversely affecting the county’s finances.”

Commissioner Dale Lewis said the commissioners “had talked about gradually” reducing the cap, “not all at once.”

A key obstacle to lowering the cap at all is how it would impact the cities of Cumberland and Frostburg and the towns of Barton, Lonaconing, Luke, Midland and Westernport. By default, each municipality is set to the county’s cap unless the town council has passed legislation.

“If the city hasn’t set (its own rate), the state will use whatever the county has,” Frantz said.

That could have a negative impact on those governments’ already strained budgets, officials noted.

County Attorney Bill Rudd suggested sending a letter to all affected towns and requesting feedback on what, if any, impact, it would have for them.

“I’m sure you’ll hear from them,” Rudd told the commissioners.

Given the less-than-optimistic projections from state funding and other county revenue sources, the commissioners didn’t ask Rudd to draft the letter.

“We said we wanted to make a change,” said Commissioner Bob Hutcheson. “We did say we were going to do something. I think we need to do that.”

Commissioner Jim Stakem said during the public meeting the commissioners would “do something.”

The county cut its property tax rate by 2 cents two years ago, he said, but perhaps “in hindsight we should have looked at this.”

Joseph Shipley of Cresaptown said he would like to see the county fall in line with rates in surrounding counties. Garrett, Washington and Frederick counties all impose a 5 percent cap. Carroll County’s cap is 7 percent. Allegany County is one of only six counties to impose the maximum 10 percent cap.

Shipley said it is “amazing” that he paid more for his home in this county than he did in Harrisburg, Pa., a capital city.

The commissioners have until September to introduce a code home rule bill to change the cap. The bill must be approved and the county must notify the state Department of Assessments and Taxation by Nov. 15 to be effective July 1, 2009.

Contact Kevin Spradlin at kspradlin@times-news.com.