The effects of three proposed tax rate cuts were presented to the St. Mary’s County commissioners at a Monday meeting, but the board took no action on the items.
However, one of the three reductions is already off the table for next fiscal year because of state rules.
Commissioner Larry Jarboe (R) made the request to see the impact of eliminating the energy tax, decreasing the cap on how much a homeowner’s property taxes can go up and lowering the age of a county property tax cap for seniors from 70 to 65.
The county’s energy tax is 1.25 percent on electricity and heating fuel bills. Eliminating that tax would reduce county government revenue by $1.3 million, financial staff said. This year’s total operating budget is $222.6 million.
There is a currently a 5 percent cap on how much property taxes on a homeowner’s primary residence can rise each year in St. Mary’s. In other counties that cap can be as high as 10 percent.
Jarboe asked about the impact of lowering the cap to 2.5 percent in St. Mary’s. That would theoretically reduce the county budget by $450,000, said Elaine Kramer, chief financial officer, but it can’t happen next fiscal year because the state must approve a change in the homestead tax credit by Nov. 15 of the year prior to the change.
The county freeze on property taxes for seniors applies to those 70 and older making up to $80,000 in net taxable income. There are about 2,000 properties now covered in the local program and in the state’s version, Kramer said. The loss in county revenues last year was $534,000 under the local program, and is expected to increase afterward to $835,000 in fiscal 2015, and then more than $1 million each year in 2016 and 2017.
Lowering the age to 65 would increase the number of those eligible by 50 percent, Kramer said, and further decrease county revenues.
In the current budget year, $101.6 million in property taxes and $82 million from income taxes are expected to fund the $209 million in revenues. The budget, without tax cuts, is expected to grow by 2 percent, Kramer said. “There’s some growth, but it’s very limited,” she said. And there is school funding to be met and the cost of personnel to operate county government, she said.
Commissioner Cindy Jones (R) said, “This county is far and above in extending general credits to senior citizens. I don’t see how you can call this a broken system.”
Jarboe said people usually make their retirement decisions before the age of 70 and the board should want to encourage senior citizens to live in St. Mary’s County, because they don’t have children to educate and don’t burden law enforcement.
As he continued, Commission President Jack Russell (D) intervened. “We’re not in a debate society here. We’re working on the budget,” he said.
Commissioner Todd Morgan (R) asked to let Jarboe continue and Jarboe said seniors are looking to buy smaller homes the older they get.
“If we make our county attractive to seniors who are well off, then that spendable money will come back into the county,” said Commissioner Dan Morris (R).
Kramer made note of the continual carrying of leftover money in the county budget, called the fund balance. This year, the fund balance is $24.9 million and Kramer said,
“Should things go to hell in a hand basket, we have the flexibility to deal with that,” if federal spending cuts affect St. Mary’s County, she said.
“Having fund balance that could be used for a worst-case scenario, I think that’s a very wise move,” Jones said.
The commissioners are scheduled to have a recommended operating budget for fiscal 2015 by March 18, 2014, to go to public hearing.