After nearly 70 hours of work sessions in the past few weeks, the Howard County Council is scheduled to vote Wednesday morning on the fiscal 2021 budgets.
County Executive Calvin Ball presented his $250 million capital budget April 1, just two weeks after the county confirmed its first case of the coronavirus. In his proposal, Ball sought funding for a new cultural center in Columbia and an expansion of the East Columbia 50+ Center.
A few weeks later, Ball released his $1.78 billion operating budget, which includes $620 million in funding for the Howard County Public Schools System.
With increases in both budgets from the previous fiscal year, Ball proposed paying for the additional costs in the capital budget by raising a transfer tax paid during real estate transactions from 1% to 1.5%. For the operating budget, Ball proposed a restructuring of the recordation tax — which pays for the recording of deeds and mortgages in the public registry and is also paid during real estate transactions.
Here’s what to look for as the council votes on the county’s financial future:
A house divided
The County Council is split on the solution to the proposed increased spending by the county during the economic uncertainty from the coronavirus pandemic.
County Council members Christiana Mercer Rigby and Opel Jones introduced legislation May 4 to restructure the recordation tax progressively. The bill, which needs County Council approval, would bring in $21 million in revenue.
Ball said the restructuring is necessary to avoid cuts due the pandemic.
The remaining members of the council say cuts are the only way to move forward during a recession. Council Chair Deb Jung, Vice Chair Liz Walsh and David Yungmann introduced amendments last week to Ball’s proposed budgets, cutting more than $90 million in capital costs and $21 million in operating expenses.
What is the recordation tax?
The recordation tax — a one-time fee paid when real estate is sold to a new owner — has been one of the most commonly used words during the council’s virtual work sessions. The recordation tax is one of three charged in Howard County on the sale of a home, with the other two being a local real estate transfer tax and a state transfer tax.
The county has projected this proposal, originally introduced by Ball and subsequently introduced as legislation by Rigby and Jones, will bring in $21 million in revenue. That revenue was projected based on a combination of the previous year’s revenue and three months of lost dollars from the pandemic, according to Rigby.
“I’d really rather not be doing this right now, but if we don’t then we have to face some really harsh realities that will significantly impact every single resident in Howard County. And this is a solution that is not felt every year like a property tax increase would be or significant service cuts would be,” Rigby said. “Those are things that are felt by every resident every year.”
Rigby and Jones propose to incrementally increase the recordation tax based on the transaction price: $2 on each $500 of the transaction price for the first $250,000, $5 on each $500 for the second $250,000, $8 on each $500 for the next $500,000, and $11 on each $500 above $1 million. The tax rate currently stands at a flat rate of $2.50 per $500 transaction.
The proposed legislation would decrease the recordation tax for residents purchasing property costing less than $250,000.
Yungmann, Walsh and Jung strongly oppose the proposal, citing concerns with increasing taxes during the economic difficulties brought on by the pandemic. During Friday’s work session, however, Walsh she would support the proposal “any other year.”
What would budget cuts mean?
Last week, three council members proposed cutting a combined $110 million from the operating and capital budgets.
Yungmann, Jung and Walsh, who have publicly opposed the recordation tax plan, proposed the operating budget cuts as an alternate solution to the $21 million in revenue the county said it needed to make up.
On the capital side, more than two-thirds of the recommended capital reductions come from funding for the county’s cultural center. The three suggest the funding be put on hold for one year for a capital savings of $63 million in fiscal 2021.
“The passage of these amendments will reflect a fiscally responsible approach,” Jung said during Friday’s work session.
Yungmann, the sole Republican on the council, said part of the goal of introducing the amendments was to get the budget back in line with the Spending Affordability Advisory Committee’s recommendation of general obligation authorization being limited to $70 million; Ball recommended $94.6 million in his proposed budget.
On Friday, Yungmann said the County Council should not have gotten a budget from the county that assumed a tax increase would pass. Before proposing the cuts, Yungmann said he reached out to the county to hear its recommendations on where cuts would have the least effect but didn’t hear back.
“The preference was for the County Council to be the bad guy,” Yungmann said Friday. “The administration has [now] reached out. There does seem to be an openness to tweak some of these [amendments].”
Friday was the first and only time council members had to discuss the proposed cuts. During the discussion, Rigby and Jones pushed for Jung to allow each department to share how they would be affected by cuts. After a procedural vote in favor, representatives from each department received about 60 seconds to lobby against the cuts.
“I’m very concerned about this year and I’m very concerned about future years,” Rigby said. “It’s a sea of bad choices, and we’re trying to pick the best ones.”
The cultural center
During his capital budget presentation on April 1, Ball recommended funding for the new cultural center in downtown Columbia.
The center would be a new home for Toby’s Dinner Theatre and 180 mixed-income residential units, as well as artist and performing spaces. It would be supported by issuing bonds that are backed by the incremental tax revenues from the Downtown Columbia TIF District; it would also require $63 million in capital funding for fiscal 2021.
Concerns expressed by representatives from the Howard County Budget Office during budget hearings on the cultural center focused on the low-income tax grant approved by the state for the mixed-income residential units. The budget office was unsure whether the county could get an extension on the grant if the capital project were to be pushed to the next fiscal year. Subsequently, there was a push to get the project off the ground in the upcoming fiscal year, which begins July 1.
Carl DeLorenzo, director of policy and programs for the county, spoke on behalf of the project throughout budget hearings and said his department has spent the past six to eight months putting the proposal together.
“We have always been confronted with a finance gap for the project,” DeLorenzo said Friday.
Yungmann and Jung said they would support the project next fiscal year when the county is more likely to be in better fiscal shape.
“We need more than four weeks to make the decision on a project like this, whether we have the financial stability to move forward on a project of this size,” Jung said Friday.
The project would come to fruition in the next three to four years if funding is approved this year.
Latest Howard County
The Howard County fiscal 2021 budget vote will be livestreamed beginning at 10 a.m. Wednesday at cc.howardcountymd.gov/Online-Tools/Watch-Us and broadcast on Comcast channel 99 and Verizon channel 44.