An advisory board recommended Monday that the state keep its property tax rate steady for the 15th straight year, but some members held out hope that a small decrease could be in store.
The Commission on State Debt unanimously recommended the rate for non-utility property taxes remain at 11.2 cents per $100 of assessed value. The state has set and kept that rate since 2007, when it was lowered from 13.2 cents.
The commission’s recommendation goes to the Board of Public Works, which is set to vote on the 2022 property tax rate on Wednesday.
Two of the voting members on the advisory commission are members of the Board of Public Works: Comptroller Peter V.R. Franchot (D) and Treasurer Nancy K. Kopp (D). Gov. Lawrence J. Hogan Jr. (R) is the third member of the BPW.
His budget secretary, David R. Brinkley, said he supported the motion to maintain the current tax rate, but hoped the Board of Public Works would discuss the possibility of lowering it.
The commission’s job is to recommend a state property tax rate that is sufficient, when combined with other funds, to pay the debt service on state bonds in the 2022 fiscal year. If the rate is held steady, the state is expected to collect more than $914 million in property taxes in 2022 and the state is expected to pay a little less than $1.4 billion in debt service that year.
The figures are based on an estimated 3% growth in property values.
Brinkley suggested that there might be enough of a cushion for the BPW to consider a small reduction in the tax rate.
He noted that if the rate is held steady and a property increases in value, the owner’s payment will go up.
“We just have to keep looking the impact of those rising assessments. There might be more of a cushion than we necessarily need,” Brinkley said.
Franchot said he thought Brinkley was “on to something.”
“If we were ever going to cut the state property tax, now might be a good time to do it,” he said.
Franchot noted that while the residential real estate market is “red hot,” commercial real estate is suffering in the recession.
“We’ve lost thousands of small businesses. So we’re gonna have to do a lot of reconstruction in the state’s economy,” Franchot said.
He encouraged Brinkley to aggressively explore the possibility of a decrease before the Board of Public Works rate-setting meeting on Wednesday.
Kopp called the discussion “a very interesting proposal,” but noted that the state’s debt obligations will continue into the future and decreased property taxes could mean higher payments from the state’s general fund for debt service.
“I would hate to increase that dependence on the general fund,” Kopp said. “The present tax rate is one that people have accepted for almost 15 years now — lower than the last few years of the Ehrlich administration. …And I’m all for keeping a steady hand on the tiller myself.”
About $260 million in state general funds are expected to go into the annuity bond fund in 2022, almost double the figure estimated for 2021. The annuity bond fund balance is projected to decrease from an estimated $150 million at the start of the 2022 fiscal year to $9.5 million at the end.
The state is expected to have more than $10 billion in outstanding general obligation bonds by the end of the 2022 fiscal year.
The commission voted unanimously in favor of keeping the tax rate steady after about 15 minutes of meeting – but the discussion was continued by the board’s public member, Paul B. Merritt, a banker who suggested that the state’s top officials should do more to make state’s overall tax climate more attractive.
“You can talk about taxes and raising money, but let me tell you, in my opinion, you need to review the whole state tax situation in Maryland, because I don’t think it’s very good,” he said.
The commission also voted to keep the state’s property tax rate for public utilities at 28 cents per $100 of assessed value.