Updated at 3:10 p.m. – The Montgomery County Council on Thursday tentatively approved an 8.7 percent property tax hike for next fiscal year, concluding work on operating and capital budgets that resulted in a rare level of cooperation with the county’s school system, cuts to already negotiated salary increases for county employees and an increase in closing costs for those who buy and sell homes in the county.
The property tax increase, which had to be approved by all nine council members because it surpassed the county’s inflation-based charter limit, will mean an increase of $326 in property taxes next fiscal year for the average county homeowner. The average home value in the county is $464,441.
There was no public debate of the property tax increase at Thursday’s meeting, which started an hour later than scheduled. County Executive Ike Leggett had proposed the same property tax increase in March, before lowering his recommendation in April.
After the unanimous straw vote approvals of the property tax rate and additions to the operating and capital budgets, each council member read prepared remarks emphasizing the importance of their maneuvering over the past few weeks geared mostly to boost school funding.
“I really want to acknowledge our taxpayers, who are partners in this restructuring effort,” said council President Nancy Floreen, who appeared to choke up during parts of her statement. “With the increase in the property tax, the owner of an average-priced home will pay less than a dollar a day more. This is a price to be sure, but a modest one we think for enhanced services and educational opportunities and I am certain that this investment in our future will enhance property values to everyone’s benefit.”
The council is set to formally approve the $5.3 billion operating budget on May 26.
Over the last few weeks, Floreen and other council members referred to the proposed tax hikes and trimming of salary increases—a move that required the county to renegotiate collective bargaining agreements with county employee unions—as unprecedented in council history.
On Thursday, they also thanked the school board, which agreed to cut deferred step increases already negotiated with teachers and other school system employees in order to divert about $36 million toward reducing class sizes by two students per class in most schools, reverting back to 2009 class-size levels.
“The fact is, the executive’s budget left a lot of work to be done and the job fell to the County Council and the Board of Education to make the tough decisions about how the money would be spent,” council member Hans Riemer said.
The operating budget will fund Montgomery County Public Schools (MCPS) at almost $90 million above the minimum per-pupil spending amount required by the state. The state's maintenance of effort law will require at least as much per-pupil education funding in future budgets, a key reason why Leggett and council members have stuck to the minimum spending requirement every year since 2009. The fiscal year 2009 budget was also the last time the county approved a property tax increase that exceeded the charter limit.
Floreen proposed the recordation tax increase, which the council unanimously approved with a straw vote Wednesday, to net the county about $200 million over the next few years. Most of the money will go toward the school system’s record $1.73 billion portion of the county’s $4.6 billion capital improvements program.
Many in the real estate industry opposed the increase, but Floreen pointed to the fact the money will be used to stave off one-year delays to addition projects at Whitman and Wootton high schools, as well as other delays for air conditioning and roof replacements and addition projects at other schools.
“There are no civilizations in history that are remembered for their tax rates, none,” council member Marc Elrich said. “Name one. People are remembered for what they did, good or bad, but they’re not remembered for how they taxed people. …I hope residents out there focus less on the dollar a day and more on our efforts to put this county on the right path.”
Council member George Leventhal defended the increase by pointing to neighboring Fairfax County, which will increase its property tax rate by 4 cents per $100 of assessed value. Montgomery County’s increase will be 3.94 cents per $100 of assessed value.
But despite the united front council members held to when it came to school system spending and the property tax increase, Leventhal on Thursday again chided Elrich for his Monday vote not to eliminate deferred step increases for county government employees. The measure passed 8-1.
“We could not have negotiated the historic agreement with the school system to restrain compensation in favor of classroom size reduction unless we opposed the same constraint on the county workforce,” Leventhal said. “That was a very hard decision and it was a test of political courage. A test that eight of us passed.”
Elrich later reiterated he voted for cutting a deferred step increase for teachers while voting against cutting a deferred step increase for county employees because county employees were a step increase behind their school system counterparts.
The budget is about $27 million more than Leggett’s recommendation, including $4 million for the county’s public campaign financing fund, $3.7 million to boost fire department staffing, $4.5 million for programs and scholarships at Montgomery College and $247,600 to extend bus service to Tobytown—a historic African American community in Potomac.
"The council also increased property taxes by an additional $84 a year for the average home above and beyond the increase I recommended. This increased burden was added by the council to support their additional ongoing program costs," Leggett said, according to a press release.
“These two factors, coupled with the decision by the council to increase the county’s recordation tax on home sales by more than $500 for the average transaction, means less flexibility for the county in next year’s budget and beyond," Leggett said. "Absent a significant economic recovery that far exceeds expectations, this will mean potentially severe budget reductions next year because we have nearly exhausted all revenue possibilities to accommodate ongoing council spending increases in this budget."