Earlier this week, Howard County Executive Calvin Ball released his proposed Fiscal Year 2021 Operating Budget for Howard County Government. The General Fund Budget request, which supports a majority of government services, totals $1.19 billion,which is on par with last year's $1.2 billion approved budget.
In the past few weeks Howard County has incurred nearly $4 million in costs related to COVID-19 response, and that number is growing weekly. Howard County is estimating a revenue loss of over $35 million in the current fiscal year, with major losses in income tax, recordation, and hotel tax. A significant revenue impact is also anticipated for FY 2021.
Despite the current fiscal challenges, the County has proposed $620.3 million for the Howard County Public School System (HCPSS), a $13.1 million increase over last year’s budget. While this is an increase from last year, Howard County Public Schools had requested $657.2 million earlier this year prior to the coronavirus crisis, so the country is proposing to provide $36.9 less than what HCPSS had requested.
To help make up for the shortfall in revenue, Council members Christiana Rigby and Opel Jones are set to introduce legislation in May that would restructure Howard County existing recording tax on real estate transactions in a progressive structure. Recording taxes are a one-time tax that are part of the closing costs of a real estate transaction, and in Maryland, are typically split between the buyer and seller. This proposal would have no impact on the regular real estate taxes paid by current homeowners, so only those involved in a real estate transaction would be impacted by this proposed change. School Board member Chao Wu thoroughly detailed how the proposal would work on his blog as did the Scott E Blog. The details of the draft legislation should become available later this week. Under the proposal, home sales under $300,000 would actually see a decrease in these taxes. Last year, the median real estate transaction was $436,565. Under the proposal, the recording tax from a transaction at this value would increase by about $700. For a $500,000 real estate transaction, the recording tax would increase from $2,500 to $3,500; $750,000 transaction would see taxes increase from $3,750 to $7,500; and a $1,000,000 sale would see recording taxes go from $5,000 to $11,500. Note that the additional $21 million in revenue anticipated from this legislation is already accounted for in the county executives revenue projections.
As pointed out by Council member Opel Jones, the proposed recordation tax restructure would help prevent reductions in services, prevent layoffs, and maintain (and possibly increase) support to HCPSS. Furthermore, it would be done in a way that would have no impact on the vast majority of homeowners and businesses in the county. For these reasons, I see the tax restructuring as a fair and respectable method for increasing revenue during these difficult times, but based on the responses to Chao Wu's Facebook post on the topic, many in our county do not.