Continuing its conservative tone from last year, a Howard County financial advisory committee is urging the county to tighten its belt on spending for next year and consider raising some taxes.
Facing continued growth in the demand for county services, uncertainty over federal funding levels and a possible decline in development, the Spending Affordability Advisory Committee recommended the county rein in its spending on government services and schools, as the county will face “significant challenges” in funding its capital construction and operating budgets.
To increase revenue, the 32-member committee suggested the county raise its transfer tax by 25 percent, a move that would need state approval. A transfer tax is paid when owners sell their property; if implemented the committee estimated the increase would bring the county $6.5 million in annual revenue.
Building on its recommendation last year to study a fee for ambulance service, the committee encouraged the county to implement a fee, which would be billed to insurance companies.
A study on a fee is underway and County Executive Allan Kittleman said he is “very open” to the idea, which the committee estimated could bring $3 million to $5 million to the county annually.
In its report released Thursday, the committee did not explicitly recommend raising property taxes, but did say the county could should consider “property and transfer tax increases and reallocation opportunity.”
Committee chairman Steve Sachs, a Howard County real estate and hotel business executive, said that because the county has some of the highest property taxes in the state, he did not want to see property taxes raised.
Kittleman has said he has no plans to raise taxes. While he said he couldn’t promise that he was “going to do exactly what they’ve said here,” Kittleman praised the work of the committee at a briefing for reporters.
The cautionary message on the county’s budget matched recent warnings from Kittleman that the pending 2019 county budget will be tight, with county departments taking a 2 percent midyear cut and a temporary hiring freeze in effect.
Th committee recommended the county develop its 2019 budget based on a 1.75 percent projected growth in revenues, lower than the 2.2 percent growth most recently projected by the Office of Budget, as a way to trim spending amid uncertainty in the federal government’s tax cut and how changes would alter state and local tax structures.
Committee member Richard Clinch, executive director of the University of Baltimore’s Jacob France Institute, said that because many county businesses rely on government contracts, they could see growth stall as the federal government pulls back spending under President Donald Trump. However, Clinch noted that defense contractors in the county would likely be exempt from federal spending cuts.
“There aren’t going to be massive layoffs, but we are going to see a decline in the procurement for jobs and slow growth in federal employment and spending,” Clinch said. “It’s unlikely to cause wholesale unemployment, but these people are going to have less money to spend. We’re just saying be cautious in your spending.”
The committee also recommended lowering the maximum amount the county may borrow through general obligation bonds to $75 million; last year it recommended $85 million.
“We’ve got to get a handle on our expenses,” Sachs said.
With the county’s recent passage of an updated Adequate Public Facilities Ordinance, legislation that works to ensure schools and roads keep pace with development, Sachs said the committee was concerned by what economic impact the tighter development limits could have on the county’s economy if construction projects, and the taxes they bring, slow.
The committee urged the county to perform a long term study of the economic impact of the new legislation, a recommendation Kittleman said he accepts. He said a study will soon be underway in the Department of Planning and Zoning.
“We don’t care whether [APFO] is good or bad, we care about the financial impact,” Sachs said.
The school system was a major point of concern for the committee, which recommended the county “really look” at whether to fund the school system above its mandatory $10.2 million maintenance of effort, said committee member Steve Poynot, the chief administrative officer for Howard Bank.
Superintendent Michael Martirano has proposed a request for $11.4 million above the so-called maintenance of effort, the minimum amount of spending the county is mandated by the state to provide the schools.
As school officials also grapple with a deficit slated to reach $50 million by summer, committee members stated they wanted to see the school system “take ownership” of its mistakes and craft a multiyear plan to address the issue before it requests county assistance. Martirano has said that county and state assistance will be necessary to pay off the debt.
Sachs said the deficit, which has been created over several years, was “egregious,” and that officials needed to “start getting smart and look at everything” in its finances to solve the issue.
Last year the county passed a $1.58 billion budget, almost two-thirds of which went to the school system, library system and Howard Community College.
Clinch said that while overall the county is in good economic health that hasn’t translated into revenue growth, leaving the county in a tight fiscal spot.
“What we did in the past doesn’t look like it’s sustainable in the long term,” Clinch said. “We need to balance service demands with revenue ability. What we want to do is say that the growth has to be sustainable in the long term, and with the risk factors that are out there caution is called for.”