By Megan Poinski
If property values don’t start increasing, the state may need to increase property taxes or tap the general fund to pay off its bond debt, legislative analysts told lawmakers.
Legislative analyst Patrick Frank told the House Appropriations Committee that with home values declining, the state is collecting less money to use to pay back bonds.
“If we keep the current property tax rate, I think in 2014, there will be a gap,” State Treasurer Nancy Kopp said. “And you will have to look at either going to the general fund or raising the property tax.”
Bonds are paid back out using several sources, including property taxes. The general fund, where most of the state’s revenues go, has not been used to pay back bonds for almost a decade.
Kopp said that the general fund has historically played a role in paying back bonds. In 2003, that burden was shifted to property taxes, and the Board of Public Works raised state property tax rate so the money would be there.
In 2010, Kopp said, the board reduced the property tax rate. With lower property taxes and homes worth less, the money is running short.
Frank said that while general fund revenues could be used to pay back bonds, it is not what he would recommend.
“Our issue really is that there’s a long term deficit in the general fund and this is adding to it, so we’d like to reduce that,” Frank said.
The property tax is currently 11 cents for each $100, Kopp said. Right now, a penny of property tax brings in $68 million.
Frank said that it appears that home values are beginning to level off, and the state will be losing fewer revenues to property tax exemptions.
“Perhaps we’ll eventually get to the point where there is no downgrade,” Frank said.
Frank showed delegates a chart that showed how much revenue the state was losing through homestead tax exemptions – a tax credit for people who live in their homes and see their property values increasing.
The homestead tax exemption softens the blow to homeowners of sharp increases in property values and also provides a hedge for state revenues, Frank said. Because property owners are not paying so much more, the state does not suffer as quickly if property values fall.
Del. Gail Bates, R-Howard, asked if rolling back the homestead exemption could help with the financial issues. Frank said that would take too long to make the necessary impact.
“Ultimately, yes, you’d have to increase the rate,” he said.
My property tax was finally reduced last year but is still not reduced to the actual market value of my home. I wish I could sell it for what the county assessment is! They need to adjust their spending. When the real estate market was out of control they took advantage of the over inflated property values to increase taxes and spending. Time to do what everyone else does when they don’t have money. Cut back on their spending.
According to O’Malley, they made significant cuts. But somehow he didn’t mention that MD’s budget increased almost 11% last year. The legislature isn’t interested in really cutting state spending. Their solution is to raise taxes, maybe not as much as MOM wants. But they will pull out all the PR props taking about kids,seniors, the poor, education, etc. The same old dog & pony show justifying their decisions. One wonders what their personal finances look like? Prudent taxpayers cut back when the money isn’t there & if these legislators don’t stop taxing & overspending, we will have to cut even more corners to exist in the Land of Peasant Living!
I have a solution…Why doesn’t the state stop spending money we don’t have so that it doesn’t have to issue bonds that they can’t pay on, thus avoiding raising taxes ?
Also, State of Maryland…why not live within your means just like your more fiscally responsible citizens.?
Property tax is unconstitutional. Allowing the govt to claim ownership of a private property for not paying a certain tax is unethical and ridiculous. Failure to pay a tax for a service should result in reduction of said service. Be being able to confiscate private property this in effects means that md believes that there is no such thing as private property and that the state has rights to everything.
Apologies for the grammar. Written from iPhone.