Municipal Tax Duplication
About Municipal Tax Duplication
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.
As an example, for FY2018, 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Although a number of the formulas for calculating the rebates are out-of-date, the road maintenance formula is regarded as accurate.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 equates to 3.77 cents on the City’s tax rate. This amount is slightly more than the difference between the Constant Yield tax rate of 50.75 cents per $100 and the City Manager’s proposed FY 19 tax rate of 54.5 cents. If the payment were made, City taxes would not need to be increased in FY 19.
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 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 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 be receiving an additional $400,000 in that category alone for FY19.
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.
Beginning three years ago, 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. City Councilmember Jarrett Smith, serving as Chapter President, had an informative panel discussion recorded on the subject and a letter was sent to County Councilmember Sidney Katz with the request. The municipalities will continue to lobby the County Council during the County’s budget process.
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 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 in FY 19 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.