Harford County government will soon begin collecting its own property recordation taxes, bypassing the clerk of the court and bringing in some additional revenue in the process, officials say.
The recordation tax is one of three taxes that are components of real estate closing costs in Maryland. Harford's current tax rate is $3.30 for each $500 of consideration, which equates to $1,980 on a $300,000 house.
The county also imposes a 1 percent transfer tax on deeds and other real estate instruments, and the State of Maryland imposes its own transfer tax of 0.5 percent, which can be reduced to 0.25 percent in certain circumstances involving first-time homebuyers.
Harford's Department of the Treasury has collected the county transfer tax since its inception in 1993, County Treasurer Robert F. Sandless Jr. said.
The recordation tax, which predates home rule in Harford in 1972, continues to be collected by the Clerk of the Circuit Court's Office, even though counties have the authority to directly collect such taxes, Sandlass told members of the Harford County Council Tuesday evening.
Sandlass and Director of Administration Billy Boniface appeared before the council requesting authorization to make the collection switch, as requested in a letter Harford County Executive Barry Glassman sent the council on June 8.
In the letter, Glassman pointed out 13 of 24 counties and Baltimore City collect their own recordation taxes, a group that includes all the larger charter counties and several larger commissioner counties, Sandless told the council.
The clerk of the court charges a 5 percent administrative fee for this service, which Sandlass said averages about $750,000 a year on collections typically totaling $15 million.
All that money would go to the county instead, he noted, as does Glassman's letter, which states: "We would be able to collect this tax ourselves or adding additional staff other than already budgeted."
"This sounds like found money for us," Councilman Jim McMahan remarked.
"Correct," Sandlass replied. "We are confident we can do it."
"Three-quarters of a million is real money that will help us keep up with some of the issues we have been dealing with," Council President Richard Slutzky said.
Councilman Curtis Beulah asked if additional staff or costs would be involved in the treasury, but Sandlass replied they already have vacancies and would most likely "craft" a postion to handle this account going forward.
"We're talking about a real minimal cost, so then overall it's a win, win, win?" Beulah asked. Sandlass replied in the affirmative.
"I just want to compliment you on this find," Councilman Chad Shrodes said. "I'm surprised it took so long to find it, but thank you on behalf of the taxpayers."
The authorization was unanimously approved, and Sandlass said they hope to make the switchover on Jan. 1, 2018, the mid-point of the new fiscal year.
The treasurer said people involved in real estate transactions shouldn't see any real difference, since the clerk will continue to collect the state transfer tax and the county had been collecting the county transfer tax.
Harford's recordation tax is dedicated to specific uses: two-thirds of the revenue is designated for school construction costs and debt service; one-sixth is for stormwater management projects and one-sixth is for county parks and recreation facilities construction.
The county's transfer tax revenue, which would amount to $3,000 on a $300,000 house, is also dedicated, one-half for school construction/debt and one-half for agricultual preservation.