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Municipal Tax Duplication

Speak Up Now About Tax Duplication!

County Executive Elrich is holding FY21 Budget forums to hear from residents about what should be included in the next County budget. Increased tax duplication payments to municipalities – particularly to the City of Takoma Park – should be included.

Discussions about what a fair tax duplication payment should have begun when Doug Duncan was Montgomery County Executive, and it continued through the Isiah Leggett administration. County Executive Marc Elrich – a former Takoma Park City Councilmember and longtime advocate for larger tax duplication payments – did not include an increase in the FY20 County budget. (Most of the budget was prepared before he was sworn into office).

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.

In February 2019, Mayor Stewart sent a letter to County Executive Elrich asking for 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Although a number of the formulas for calculating the rebates are out-of-date, the road maintenance formula is regarded as accurate.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 in FY 21 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

Initiatives Sections