Howard County must radically slow the pace of its borrowing or raise taxes, County Executive Charles I. Ecker was told yesterday.
With an election year coming up, Mr. Ecker said he has no plans for tinkering with the county's $2.59 property tax rate.
"The recession is over, but the recovery is going to be slow and long with ups and downs," Mr. Ecker said.
The property-tax rate was lowered 4 cents in 1990, the last time the county held local elections and a year in which the county had a $21.5 million surplus. The following year, Howard found itself facing a $3 million deficit, forcing Mr. Ecker to raise the property tax rate 13 cents.
"My inclination is not to raise the piggyback and property taxes" for the coming fiscal year, Mr. Ecker said yesterday after receiving a 36-page report from an 18-member task force that has been studying the county's ability to raise revenues and absorb new debt over the next five years.
Without a tax increase, the county should limit new debt to $25 million a year, the task force recommended, a target that will be difficult to meet since the county school system already has requested $31 million in capital projects.
Task force members also recommended following last year's precedent, adding a rider to the budget that would allow the county to increase its spending at midyear if revenues are higher than anticipated. In June the County Council approved a fiscal 1994 budget that set aside money for employee raises if revenues exceeded expectations. And county workers will receive the raises beginning Jan. 1.
The same idea could be used in the coming budget for other projects, task force Chairman Joseph Raksis said. The revenue estimates are conservative and there is "some possibility " the county could receive $7 million to $8 million more than projected for the fiscal year beginning July 1, he said.
If so, the county should develop a contingency plan for spending the extra money on worthy projects that fail to make the final budget cut, Mr. Raksis said.
Needed projects not funded in the regular budget should be identified and approved on a contingency basis, he said. Otherwise, extra money automatically would be funneled into the county's rainy day fund until it reaches 7 percent of the previous year's audited budget about -- $19 million. There is about $7 million in the fund now. "By increasing the rainy day fund too quickly, the county may be under-funding currently needed services," Mr. Raksis said.
John P. Hollerbach, chairman of the task force subcommittee dealing with the county's mounting debt of $254 million, said the county has accumulated too much debt to afford many new projects without raising taxes.
He suggested that county agencies, such as the public works department and the school system, meet to review their capital needs to see if costs can be reduced.
In addition to $31 million in capital spending proposed for county schools, Mr. Ecker said, a variety of pressing needs will make hitting the $25 million goal difficult.
Mr. Ecker said the Police Department is using cars with more than 100,000 miles, many roads must be resurfaced or they will have to rebuilt entirely, and the county's liability insurance reserves are dangerously low.
In addition, the county had unanticipated expenses at the old Carrs Mill landfill, where cancer-causing chemicals were found leaking into the soil and the nearby ground water. The county has already spent $700,000 on the cleanup and could spent another $6 million in the coming year, Mr. Ecker said.
The task force report expresses similar views. The two main sources of county revenue -- property taxes and the county's piggyback share of state income taxes -- are still growing, but at a much slower pace than in previous years, members said in their report. The county's piggyback income tax rate -- the percentage of state income tax that residents pay local jurisdictions -- is 50 percent. It can grow to a maximum of 60 percent.
Fewer high-income families are moving to the county, and as a result, the county is receiving less money from income taxes, the task force reported. "Area payrolls have been and continue to be impacted by down-sizing in the defense and financial industries. . . . Much of the current growth in personal income may be tied to refinancing of home mortgages and tax strategies."
The property tax situation does not appear to be much better, according to the report: "There remains an oversupply of commercial real estate which will continue to retard new commercial construction for several years."
Although new-home sales are strong, sales of existing homes will remain sluggish, the task force predicted. Members worried that an increase in consumer spending results not from increased income, but from what they said was a high level of home refinancing.
Mr. Ecker will send his proposed capital and operating budgets to the County Council in April. The council will vote on them in late May. The new budget will take effect July 1.