County Councilmembers Kristin Mink (D-Dist. 5) and Will Jawando (D-At-large) introduced legislation Tuesday that aims to increase the county’s recordation tax, which is applied whenever real estate is transferred from one party to another or refinanced in the county. Money collected would be used for capital projects and affordable housing.
The bill comes less than a week after County Executive Marc Elrich proposed a 10-cent property tax increase.
According to council staff documents for the bill, Mink and Jawando’s legislation would impact various parts of the recordation tax in different ways. Mink is lead sponsor of the proposal and Jawando is co-sponsor.
Recordation taxes are applied whenever real estate is transferred from one party to another in the county. The “‘base’ recordation rate is $2.08 for each $500 on the sale price or, if refinancing, on the additional amount borrowed over the remaining principal,” according to council staff. That revenue is allocated to the county’s general fund, and the “base” rate remains unchanged in Mink and Jawando’s bill.
Other aspects of the recordation tax would be increased to raise money for county government capital projects (schools, parks, recreation centers, police stations, firehouses and other similar projects) and affordable housing funds. One part of the tax—the “school increment,” which went into effect in 2004—would be increased from $2.37 to $3.79 for each $500, effective July 1. That money would be used for Montgomery County Public Schools capital projects. That part of the tax “is also based on the sale price or, if refinancing, on the additional amount borrowed over the remaining principal, according to council staff.
The “recordation tax premium” applies to properties or refinancing that are over half a million dollars. Mink and Jawando’s bill proposes increasing that from $2.30 to $3.45 for each $500, effective July 1. Funds from that premium are split between county government capital projects and the county’s Housing Initiative Fund, which is used for affordable housing.
Lastly, the legislation creates a “premium rate” for property or refinancing of properties valued at over $1 million. The rate would be $1.15 for each $500. Funds from that portion of the tax would be split between county government capital projects and rental assistance for low- and moderate-income families.
According to council staff analysis, the proposed increases would raise over $319 million from fiscal years 2023 to 2028, and an increase of over $260 million for school and county government projects.
Mink said during the introduction of the bill that she understands the impact of the bill on housing costs—on a $500,000 home with a 20% down payment, it would be about $1,100 more in recordation taxes, “not a trivial amount,” she said.
But the bill is meant to raise money, especially for school buildings, many of which are aging and deteriorating, Mink said.
“I know we’re all well-aware and concerned about the cost of housing in our area,” Mink said. “I also believe that anyone buying a home in the county has a stake in the quality of our public schools, starting with the condition of the school buildings.”
Jawando said that while there are concerns about increasing the recordation tax, the structure of the changes are progressive—meaning that higher-value homes pay a greater level of taxes.
There are real, structural issues with the capital budget, and now is the time to take some action on the recordation tax, in order to address school and county capital projects, along with affordable housing, he added.
In an interview, Mink said that debate over raising the recordation tax has occurred with prior County Councils. Recently, the council’s Education and Culture committee heard from Montgomery County Public Schools officials, who said that current county budget projections call for tens of millions of dollars in budget reductions to school capital projects.
The county’s Board of Education asked for $165.7 million more than the original capital improvement program for fiscal years 2023 to 2028, per council staff documents. Mink said her and Jawando’s proposed recordation tax increases account for that, along with the anticipated increase in project costs for capital projects that have not gone out for bid to potential contractors and construction companies.
“We are looking at [school] projects that have already been delayed, [and] desperately need to get done,” Mink said. “Some [Americans with Disabilities Act] updates were put on the non-recommended [capital projects] cuts list [from Montgomery County Public Schools.] It’s not small extras that are being put on the chopping block.”
“We all want these [school] projects to get done,” she later added. “If there are other ways to make sure they get done, I’m completely open to that conversation.”
A public hearing for the bill is scheduled for April 11 at 1:30 p.m., and a worksession at the council’s government operations and fiscal policy committee will occur sometime after that.
