TAKOMA PARK – With multiple projects on the horizon, Takoma Park is seeking to increase the real property tax rate to withstand the brunt of the financial burden – a departure from a pattern of previous tax-rate decreases.
City Manager Suzanne Ludlow has proposed increasing the real property tax rate from $0.5291 to $0.556 per $100 net-assessed valuation. Ludlow wrote in the proposed budget that “for the last four years, the Council has actually lowered the tax rate each year, so we have had to rely on reserves to make up the difference,” even as Ludlow has recommended tax rates that would have slightly increased revenue.
Ludlow kept the proposed plan blunt: the increase in the tax rate is to keep a “maintenance of effort” budget. Decreasing the tax rate will mean necessary cuts to programs, services and possibly city staff positions.
The city has relied on reserves in the past to offset the gap between general fund revenue and expenditures, but it has reached a point where the “padding” is no longer there, and increased tax revenue is necessary to keep the reserves at an adequate level.
Ludlow also wrote about other budgetary challenges, which will strain the flow of money to the city, such as the Inventory Tax portion of the Personal Property Tax on businesses. The council voted to remove the inventory tax effective for fiscal year (FY) 2020, which Ludlow has called a move that supports the business community in the long run. But the approximately $320,000 in revenue will be gone for FY 2020.
Other issues for the budget include a freeze of tax duplication, costs associated with the city’s change to LED streetlights, preservation of the Dorothy’s Woods property and a paltry property assessment.
The most-recent property assessment for Takoma Park came out mixed, with 37 percent of single-family homes showing a lower assessment, according to the proposed budget. Overall, the increased value of assessment for FY 2020 was 0.6 percent: if the current tax rate stayed the same, Takoma Park would gain less than $76,000 in increased revenue over FY 2019, according to the proposed budget.
For example, of the 170 single-family homes in the city worth less than $400,000, 81.2 percent decreased in value; 74.4 percent or properties assessed at a value between $400,000 and $450,000 decreased in value, while on the high end of houses worth more than $700,000, 5.7 percent of properties decreased.
“Is it possible that the less-expensive homes, and the people who might buy them, maybe have less certain job situations, and are people perceiving that the economy is slowing down, or that it’s a less secure time to purchase? Maybe folks who make more money are less worried about that,” said Councilmember Peter Kovar in an April 3 council meeting.
“If you are buying a house that is $400,000 my guess is that times are a little bit tight. That’s a big amount for a lot of people. Compared to some of the other homes, I can see it being tight. If you look at our income tax revenue not coming in very high, I think there’s a lot of people who have uncertain incomes,” Ludlow replied.
One of the biggest issues facing Takoma Park is staff wages. While the city has tried to keep wages fair, the council discovered the wages were lower than those of surrounding jurisdictions five years ago. Wage increases brought the wages up gradually to come within standards, but doing so has put pressure on the budget, as tax revenues have not kept up with capital expenditures and increased personnel.
Ludlow wrote in the FY2020 proposed budget that “ongoing costs such as personnel need to be paid with on- going revenues. Since personnel costs are directly associated with services, cuts in personnel can really only come from cuts in services.”
The city is also hit by the commencement of a slew of projects and other significant events coming soon. The construction of the Purple Line, the departure of Washington Adventist Hospital, construction on the Flower Ave. Green Street and the renovation and expansion of the Takoma Park Library are all either about to begin or already in the process of doing so.
With the talk of a possible tax increase, the issue arose of residents who may have trouble paying for it. The city assists with various credits, including with the State Homeowners Tax Credit program as well as other state and county tax credit options. Additional credits may be established, according to the proposed budget.