Anne Arundel County's budget chief suggests the county give Baltimore roughly $9.3 million from misdirected tax receipts in a lump sum, rather than drag it out over years. And County Executive Janet S. Owens said she is inclined to agree.
Yet until The Sun reported the tax processing glitch Saturday, Owens had hoped to keep the issue from the public, at least temporarily. Even though it was buried in budget documents, she sent the County Council members a "confidential" memo May 1 asking them to stay quiet.
"I knew Baltimore would come calling and say, 'Give us our $9 million,' " Owens explained yesterday before agreeing to release her memo.
The processing error, discovered in March, sent the $9.3 million to Anne Arundel, mostly during a recent three-year span, according to the state comptroller's office. Now the question is how to make the city whole without imposing an undue burden on its southern neighbor.
But, while Baltimore is cash-strapped, Arundel is relatively flush and had been expecting to end the fiscal year June 30 with a $40 million surplus. So, both governments seem to agree: the sooner, the better.
"It probably makes more sense to do it all at once and be done with it," said John R. Hammond, Arundel's budget director. "We have the balance right now in our available-fund balance. To the extent we pay it out over time, it's just a further draw on operating revenue in future years."
In a neighborly gesture, he added, "It certainly makes it easier to the extent Baltimore City wants this money all at once."
While the state has not settled on a repayment method, Comptroller William Donald Schaefer has "promised Janet Owens he would do whatever would be best for the county, and that should say a lot right there," said Schaefer's spokesman, Michael Golden.
Owens said she agrees with Hammond, as long as an audit confirms the county received money intended for Baltimore. She said she is not convinced the trust-related taxes paid by Baltimore Mercantile-Safe Deposit and Trust Co. were improperly distributed to her county.
In her memo to council members, Owens explained that her vague reference to saving part of the surplus for "the unknown" in her May 1 budget speech referred to the $9.3 million. She told the council she had met with Schaefer and wanted to continue those private discussions.
She went on: "I am asking that you preserve the confidentiality of this matter to permit us to explore what hopefully will be a good result for the County." Despite her call for secrecy, her staff briefly mentioned the glitch in two separate budget books available to the public.
Asked about the seemingly contradictory approach, Owens said, "There are lots of budget books. I didn't know how long it would take you [reporters] to find out."
The estimated $9.3 million in tax payments was made to the state by Mercantile on behalf of trusts it manages. Trusts pay income tax to the city or county in which they are administered. Mercantile is headquartered in Baltimore, but the bank's division that mailed the tax returns is in Anne Arundel.
Because the division's mailing address listed Anne Arundel, the comptroller's office forwarded the tax receipts to the county's coffers instead of the city's.
After Schaefer settles on a way to correct the mistake, the county would not write a check to the city; rather, the state would reduce future disbursements of tax money to Anne Arundel and increase those to the city. The effect would be the same.
The revelation has highlighted the different fiscal fortunes of Baltimore and Anne Arundel.
While the city faces a projected budget shortfall of $21.3 million, the county's picture is much brighter. "We were fortunate enough to be in a position to give the money back that doesn't belong to us in a timely fashion," Hammond said.
Councilman John J. Klocko III, a Crofton Republican, said he was surprised by how easily the county could absorb a multimillion-dollar hit, especially because Owens says her proposed budget is lean.