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Municipal Tax Duplication

An Open Letter to Montgomery County Councilmembers:

Dear Councilmembers,

Over the next two weeks, you have the opportunity to take a significant step towards finally resolving municipal tax duplication issues that have gone on for decades. The County Council’s GO Committee has recommended funding and processes that will build on hard work done by municipal and county officials over the past few years. What are these recommendations?

  • Adding $5 million to the tax duplication payment recommended by the County Executive so that the County’s municipalities receive the amount that is appropriate for FY22; and
  • Expressing the expectation that, by October, the County Executive’s staff will negotiate with the four municipalities with police departments to determine the appropriate rebate amounts for police services for FY23 and beyond; and that also park maintenance formulas and County Code language will be updated.

What do we ask you to do? Vote to accept the unanimous GO Committee recommendation regarding tax duplication when it comes before you.

We also ask County President Tom Hucker and all Councilmembers to act to ensure that the full additional $5 million is in the final FY22 County budget.

THANK YOU to GO Committee Chair Nancy Navarro and Committee Members Councilmembers Sidney Katz and Andrew Friedson! We appreciate your understanding of the hardship the municipalities have faced due to having the rebates frozen since 2012 and your belief that this is the year to resolve the issues.

Best regards,
Montgomery County municipal residents

So, send thanks to:

Urge approval of the GO Committee’s recommendations to:

And, urge Council President Tom Hucker to put the $5 million in the reconciliation budget:

 

Final Push Ahead on Tax Duplication Fairness!

Thanks to a large-scale push by Montgomery County municipal leaders and residents, the County Council’s Government Operations (GO) Committee recommended on Friday that the municipalities get the municipal tax duplication rebate amount they had been requesting for FY22 and put the processes in play to get fair rebates in FY23 and beyond. This is a tremendous win, but is only a recommendation to the full County Council. The full Council needs to approve the GO Committee recommendation and then Council President Tom Hucker needs to put the money in the Reconciliation document for final approval.

Read the entire article:  Final Push Ahead on Tax Duplication Fairness!


Information Regarding Tax Duplication!

The County Executive has a proposal to change the Montgomery County provisions regarding tax duplication payments to Montgomery County municipalities.  Under these provisions, the County would only pay 60% of the Transportation category – the category that rebates funds to municipalities for road repair work that County taxes are paid for but only the municipalities do. The proposed resolution language also does not include many provisions of importance to the municipalities, most importantly 1) regular review of rebate formulas and 2) a way to allow some rebates for shared services. Despite the claims of Rich Madaleno, the County’s Chief Administrative Officer, the proposed changes do not allow for increased payments to municipalities after FY23  nor a way to address compensation for police services for those municipalities (Gaithersburg, Rockville and Chevy Chase Village) that have a police department but share some policing services with Montgomery County.

For the upcoming budget for FY22, we ask:

  • 100% formula amount for Transportation and the provisional amounts agreed to for Takoma Park Police, Takoma Park Crossing Guards, and Park Maintenance rebates be included in the FY22 budget – an amount that would total $14,203,315.
  • That Code amendments be adopted to provide for a consistent process and schedule for reviewing and updating the rebate formulas and to permit payments for certain shared services.
  • The negotiations regarding the formulas for the categories other than Transportation should begin promptly so that they may be used for the FY23 budget year.

The subject of tax duplication is complex, but there is a good amount of information in the following documents:

April 19, 2021 Letter from Mayors of Gaithersburg, Rockville and Takoma Park

Article from Bethesda Magazine  –  Just a note, the Bethesda Magazine article did not refer to the terms of the changes proposed by the County Executive in the draft resolution dated March 11, 2021. In that document, only 60% of the Transportation amount would be rebated permanently and there would not be an option for other municipalities to receive compensation for their police services. The two-year phase-in mentioned by the County Executive is only to this lower number, not to the 100% amount.

March 16, 2021 Letter to County Council President Tom Hucker

Please send a message to the County Executive and County Council to add $5,210,245 to the County’s Proposed FY22 Budget and move forward on the other municipal requests.

Email addresses for the County Council:

Please see this City Council Resolution 2021-8 for the position of the City.

Since FY2012, Montgomery County has essentially frozen the amount of rebates provided to municipalities. These rebates are to return the amount of County tax money collected from municipal taxpayers for services the County DID NOT PROVIDE because they were provided by the municipalities instead.


Information From Past Years

In February 2019, Mayor Stewart sent a letter to County Executive Elrich asking for a fair tax rebate payment.

This letter followed up on a February 2018  letter sent by the Montgomery County Chapter of the Maryland Municipal League regarding fair tax duplication payments, particularly regarding road maintenance. Montgomery County does no road maintenance within municipalities but taxes, residents as if it does.  Then it returns just a portion of these funds to municipalities.

As an example, for FY2018, (the most recent information available) the County would have spent $11,075,205 on road maintenance in municipalities if the County-owned the roads. The County only rebated $8,168,435 in total tax duplication payments back to the municipalities (and this amount includes rebates for several other categories in addition to road maintenance, including $2,515,147 for Takoma Park Police).

Although a number of the formulas for calculating the rebates are out-of-date, the road maintenance formula is regarded as accurate. Each year County staff calculates the amounts that the various formulas call for, but each year the County Executive keeps the total actually paid at a frozen level.

The City of Takoma Park has been receiving $3,513,643 for tax duplication for many years. If the County paid the amount that the tax duplication formulas equal for FY2018, the City would have received $4,415,657. This unpaid difference of $902,014 equated to 3.77 cents on the City’s tax rate for FY19.


Tax Duplication Payment for Police and Police Rebate

Besides the tax duplication payment for police that has been frozen at $2,515,147, Takoma Park receives a police rebate that now totals about $1 million from a formula in a special County Code provision.

In the County Executive’s budget message for FY 19, Mr. Leggett stated, “Since 2007, I have added 132 police officers to the Montgomery County Police Department. While County tax-supported spending went up 24 percent over the past 11 years, I made sure our Police budget rose by nearly 33 percent.” During that same period, the County’s payment to Takoma Park for the tax duplication rebate for police rose just 8.3%. Because the County couldn’t cut or freeze the County Code police rebate, the combined amount increased by 19.6%. If the County would have increased the combined police payments for Takoma Park by the same rate they increased their own, the City would have received an additional $400,000 in that category alone for FY19.

In May 2019, a letter was sent to County Councilmember Katz and copied to other county officials regarding an approach to establishing fair tax duplication payments regarding policing services. There has been no follow-up to date by County officials despite a statement that County staff would meet internally to prepare for a meeting with municipal officials.  With County FY21 Budget preparation beginning, discussions need to take place promptly if revised numbers are to be included in the County Executive’s proposed budget.


Municipal Efforts to Restore Tax Duplication Payments

City officials, and particularly City Manager Suzanne Ludlow, have been working for many years on getting fair payments to municipalities from Montgomery County.  Suzanne helped negotiate the police tax duplication formula in 1999 and then worked to see that it not be cut, as was proposed several times. Former City Manager Barb Matthews was later on a Task Force that identified a number of improved formulas for the various tax duplication categories. While there was agreement on several of the formulas, the Recession hit the County hard and tax duplication payments were unilaterally cut by 25% by the County Executive in FY 2011. Through strong City lobbying efforts, a special payment of $650,000 was made in FY 2013 just to Takoma Park to restore tax duplication funds, particularly for police services.

Suzanne served on a County/City Working Group to revisit the tax duplication process and formulas. Agreement was reached in many areas, including process, the need to consider rebates for certain services that both a municipality and the County provide (such as recreation, senior services, and police services in Gaithersburg, Rockville, and Chevy Chase Village), as well as agreement on the road formula, which is the largest category and affects all of the municipalities.

Since that time, the Montgomery County Chapter of the Maryland Municipal League has taken up the work of pressing the County Council to begin restoring the tax duplication payments.

Residents are urged to communicate the need to fairly compensate municipalities with the funds the County collected for but did not spend on, services within municipalities. These rebated funds can help lower the municipal tax rate so that residents are not taxed twice for services they receive once.

Points residents can make:

  • Residents shouldn’t be taxed twice for the services they receive once.
  • The County should work with the municipalities to update the tax duplication provisions in the County Code so that municipalities are fairly compensated.
  • An important first step is for the County to pay the full formula amount for road maintenance to all municipalities and to continue to pay the Takoma Park police amount.
  • The County should work with the City of Takoma Park in updating the formula for Takoma Park police services to reflect the amount the County would pay if it were responsible for police services.

Links & Notes

FY18 Municipal Tax Duplication Payment Summary

 

 

 

 

 

 

 

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