Montgomery County homeowners living in three towns are in for a double property tax increase in Fiscal Year 2017.
Both the County government and the town governments recently approved real estate tax increases, with the County Council raising property taxes from 98.7 cents per $100 of assessed value to $1.02 per $100, an 8.7 percent increase.
Town governments in Chevy Chase, Poolesville and Somerset also all approved property tax increases this month.
Meanwhile in Kensington, personal property taxes for businesses and utilities are due to rise while the town’s real estate tax rate remains flat.
A property tax is new for Town of Chevy Chase residents, who are set to be charged a town tax rate of 1 cent per $100 of assessed value for homes in Fiscal Year 2017 in addition to the County’s property tax rate.
In Poolesville, the real estate tax rate is rising from 17 cents per $100 to 17.56 cents per $100.
For a $400,000 residential property, the town property tax bill would be $702.40 in FY ’17, up $22.40 from the FY ’16 amount of $680, according to Poolesville Town Manager Wade Yost.
Meanwhile, the Somerset Town Council voted to raise the town’s property tax from 8 cents per $100 of assessed value to 10 cents per $100.
Two municipal governments voted to lower property tax rates in FY ’17: Washington Grove and Chevy Chase Village.
Other towns and villages in the County either kept their tax rates flat or did not disclose their approved or proposed FY ’17 budgets prior to deadline. The next fiscal year begins July 1.
According to Somerset Town Manager Rich Charnovich, the United States Supreme Court’s decision in Comptroller of the Treasury of Maryland vs. Wynne created uncertainty at the state and municipal level, which contributed to the rate increase.
The Supreme Court ruled 5-4 that residents who pay income tax to another jurisdiction for income earned in that other jurisdiction should be allowed to count a tax credit against the state and localities, not just the state.
That means counties, cities, towns and villages across Maryland will have to pay back taxpayers for improperly taxing their out-of-state income.
Charnovich said Somerset’s tax increase is “basically due to that.”
“Somerset is going to be affected very significantly by the Wynne case,” he said. “The Wynne case, it’s still a moving target and we are wanting to maintain our existing service level.”
Charnovich said he did not have numbers for how much money the case would affect the town’s budget as the town is “not even paying anything back until this November.”
He added state income taxes returned to municipalities “are very volatile year to year, so the Wynne case really complicated things even more.”
Other towns and villages are less affected by the Wynne decision.
“We have the estimate of what it’s going to cost,” said Martin’s Additions vice chairman Arthur Alexander. “But we will probably pay it back within one lump sum. It’s well within our budget capabilities.”
He said the state comptroller estimated the village will owe about $70,000 in tax repayments, which is less than 10 percent of the village’s $800,000 budget.
“So $70,000 isn’t that big and we’ve been running a lot of surpluses, so we can just pay it out of the budget (reserves),” said Alexander.
Kensington Town Manager Sanford Daily said the Wynne decision did little to affect the town’s bottom line.
“Basically, when it was all done and calculated, we weren’t hurt very bad. In fact, I think according to the Comptroller’s office, it was about neutral,” said Daily.
However, Daily said the Wynne decision has created confusion between the state government and the localities.
“Nobody seems to know how they came up with these numbers and how municipalities got what they got on the income tax,” he said. “Basically, when we got the answers from the state, we were far better off than some of the others.”
According to Daily, the city’s $2.77 million budget increased by $25,000 to pay for renovations to the Noyes Library for Young Children to make the library more handicap accessible.
Washington Grove Mayor Joli McCathran credited the town’s treasurer Mary Challstrom with helping the town deal with fallout from the Wynne decision.
“We were lucky enough so that our treasurer knew exactly who was in our town,” said McCarthran, later adding, “We were right on the mark.”
The mayor said the town council planned on May 23 to decrease its real estate tax by 1 cent in response to the County Council passing a tax increase.
The town also has one of the highest real estate tax rates for towns in the County at 28.6 cents per $100 of assessed value, which the town council voted to lower to 27 cents per $100 Monday.
“We were talking a good amount that the County Executive wanted to increase our taxes and (council members) felt they wanted to lower (the property tax) to try to counterbalance it a little bit,” said McCathran, who described the decrease as a “good faith measure.”
“We are really healthy and we have unrestricted funds,” she said.
Challstrom noted the town’s budget is still increasing from $495,000 to $605,000.
“Well, we’ve built up a fairly healthy reserve,” she added, adding that the town has “taken in a fair amount of tax receipts, much more than we budgeted.”
“They thought we could lower the tax rate and maintain a health reserve and a healthy plan for working on the woods and things,” Challstrom said, referring to the town’s forest management program.
Washington Grove is also purchasing a generator for the town hall as well as a mower and a skid loader for maintenance, according to the 32nd-year treasurer.
The Chevy Chase Village Board of Managers last month approved a budget with a tax rate decrease from 8.28 cents per $100 of assessed value to 8.07 cents per $100, which the managers projected in their budget to bring in the same amount of revenue as 2016.
Among the three towns raising tax rates, Poolesville has the largest population, counted at 4,883 residents in the 2010 census.
Also in Poolesville, water and wastewater treatment rates are also rising by 2 percent.
“It’s a sliding scale, so the more you use, the more it costs,” said Yost, the town manager.
For people using 0 to 30,000 gallons, the fee is $9.65 per 1,000 gallons used. For 30,000 to 40,000 gallons, the cost per 1,000 gallons increases to $10.81. It then rises to $11.94 per 1,000 gallons for people using 40,000 to 50,000 gallons.
Above 50,000 gallons, the rate is $13.12 per 1,000 gallons.
The increased rate is “based on what it costs to run the system,” said Yost, noting the system costs a little more than $1 million to operate, including the costs of chemicals, electricity and staff salaries.
Poolesville and Rockville are the only two municipalities within the County that treat their own water; the Washington Suburban Sanitation Commission (WSSC) treats water for the rest of the County.
In Section 3 of the Village of Chevy Chase, the property tax rate of 2 cents per $100 of assessed value is set to remain the same, according to Village Manager Andy Leon Harney.
Section 3 also charges a personal property tax rate of 5 cents per $100.
“We just decided to keep it as it was and we really don’t have a full comprehension about the full impact of the Wynne decision,” said Harney. “We have some estimates but we really won’t know for some time what that full impact is, so it’s hard to plan around it.”
She said the decisions affects taxpayers through the year 2014, which means taxes filed for 2015 will not be affected by the Wynne decision.
In the Town of Garrett Park, the property tax rate is due to remain the same at 21 cents per $100 of assessed value. The personal property tax is $1 per $100 of assessed value and the refuse collection fee collected by the County for the town is $333 a year.
According to Town Manager Gene Swearingen, the Wynne decision left “very little impact” on the town and the payments are spread out over a number of years.
“So it really has had a negligible impact on us,” said Swearingen, assessing the cost to the town at less than $10,000.
“We will pay it over time,” he added. “I would expect, we had assumed there would be a first payment in about the November timeframe, I think the second quarter of our Fiscal Year ’17 (budget cycle).”