In a last-ditch attempt to save his transfer tax proposal to fund school construction, Howard County Executive James N. Robey has warned legislators that using the income tax instead would delay projects or risk financial gridlock for the county.
In a letter dated Feb. 7 and sent to the county's state legislators before their discussion of the transfer tax scheduled for today, Robey argued that using an income tax increase to pay for borrowing $215 million for school construction would incur $18.7 million in annual interest payments for a 13-year stretch by 2011, taking operating budget cash from future county administrations. A vote is expected next week.
The income tax "option was considered and determined not to be viable because of the onerous debt it would place on future administrations and taxpayers," Robey wrote.
Using revenue from higher income taxes for capital needs would mean no money in the operating budget for things such as higher teacher salaries, which nearly every legislator favored during last year's election campaign.
If legislators do not approve the increase in the transfer tax, Robey said, "we will have to make a choice between compromising the future well-being of Howard County or denying sorely needed school construction funds."
Robey wants the legislators to increase the real estate transfer tax from 1 percent to 1.5 percent, which would raise about $10 million a year in a fund that could be used to borrow $215 million for school construction, and then pay off the debt.
Because the fund would be for that purpose only, the transfer tax increase would not burden the county's operating budget and eventually would generate revenue to pay off the debt.
Most of Howard's legislators appear to favor the views of county real estate agents, who oppose raising the transfer tax because it would raise the cost of buying a home. A $250,000 home would cost $1,250 more at settlement.
Though no legislators have taken a firm position for or against Robey's bill, most feel it is fairer for all of their constituents to pay higher income taxes than it is for some to pay a one-time tax when selling a home.
Del. Frank S. Turner, a Democrat who is Howard's House delegation chairman, said the county's 11 legislators worry that they might have to vote for statewide tax increases to help ease the state's budget deficit, and they do not relish voting for a local tax increase, too.
"There's lots of tax bills on the table down here in Annapolis. For the most part, people at the state level don't want to go home and raise taxes twice."
State Sen. Sandra B. Schrader, a Republican, said she wants to delay the voting. "I don't have enough information yet," she said.
Democratic Del. Neil F. Quinter has proposed five amendments, including one, co-sponsored by fellow Democrat Shane Pendergrass, that would give the county government the authority to raise the transfer tax and another to exempt from the tax increase homes selling for less than $200,000.
Columbia Democratic Del. Elizabeth Bobo said she is not afraid to raise taxes, if needed. She prepared two amendments, one to limit the transfer tax increase to new homes and another, co-sponsored with Quinter, that would close a loophole that allows large commercial interests to avoid transfer taxes on property sales.
Bobo said her review of county school enrollment figures shows that more than half of new county students might come from sales of existing homes, but that they go to older schools. "What bricks and mortar is needed to accommodate them? Nothing," she said.
Republican Del. Gail H. Bates, a legislative aide to Republican Charles I. "Chuck" Ecker when he was county executive, said she does not buy Robey's logic.
The high interest payments are "going to happen whether you use the transfer tax or the income tax. I don't understand what difference that makes," she said.
"It sounds to me like the issue is he [Robey] wants to raise the income tax anyway," she said, adding that raising teacher pay "would be a much higher priority of mine" than new buildings.
Bates noted that Robey and the County Council reduced class sizes in first and second grades, eliminating more than 2,000 classroom seats. "They made that choice," she said, and should use their own tax tools to raise money.