By Adam Pagnucco.
Determined to not be outdone by County Executive Marc Elrich’s 10 percent property tax hike, Council Members Kristin Mink and Will Jawando have introduced a bill containing a tax hike of their own.
Bill 17-23, on the calendar for introduction on Tuesday, is lead sponsored by Mink and co-sponsored by Jawando. The bill would raise the county recordation tax, which is charged on mortgages and deeds of trust, in three ways. The language below appears in the bill’s introduction packet.
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The “base” recordation rate is $2.08 for each $500 on the sale price or, if refinancing, on the additional amount borrowed over the remaining principal (if acquiring a home as a first time home buyer, the first $100,000 of the sale cost is exempt.) Bill 17-23 would not change the “base” rate or how its revenue is allocated to the County’s general fund.
The “school increment” went into effect in 2004. It is also based on the sale price or, if refinancing, on the additional amount borrowed over the remaining principal. This Bill would raise the rate from $2.37 to $3.79 for each $500, effective July 1, and considered about a 60% tax increase. Currently, the proceeds can be used for any Montgomery County Public Schools (MCPS) capital project. The Bill would still dedicate all the proceeds to MCPS projects.
The “Recordation Tax Premium” went into effect in 2008. Unlike the other two elements, the Premium applies only to the cost of a property or a refinancing that is in excess of $500,000. The proceeds are split equally – half is allocated to County Government capital projects (i.e., capital projects of departments in the Executive Branch); the other half is for rent assistance. This Bill would raise the rate from $2.30 to $3.45 for each $500, effective July 1, and would be approximately a 50%+ tax increase. The Recordation Tax Premium is an important revenue source for the Housing Initiative Fund. It has been used for traditional monthly rental assistance and to make many new units affordable for low income seniors.
Bill 17-23 would also add a new premium rate of $1.15 for each $500 or fraction of $500 of the amount over $1,000,000 to be allocated for the Montgomery Housing Initiative, a 100% tax increase. The proceeds would be split equally – half allocated to County Government capital projects, and the other half is for rental assistance for low and moderate-income households.
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This bill is reminiscent of Bill 15-16E, introduced by Council Member Nancy Floreen in 2016, which also raised the recordation tax and split the proceeds between county capital projects and rent assistance. That bill was supported by the county PTAs and bitterly opposed by the realtors. After the bill was passed unanimously, the realtors got even by endorsing Elrich over Floreen in the 2018 general election even though they had many differences with Elrich. They are sure to oppose this new Mink-Jawando bill this time around.
There is no denying that there are real needs in the capital budget and for rental assistance. However, the cost of housing is skyrocketing and this bill will make that problem worse. What balance will the county council strike? And if this bill is combined with Elrich’s 10 percent property tax hike, rent control and the vacancy tax in the Mink-Jawando-Elrich rent control bill, what will that do to the county’s real estate industry?