2016 | Schools

Real Estate Agents Push Back Against Proposed Increase in Recordation Tax

School system advocates call increase a reasonable approach to addressing school construction needs

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Real estate agents faced off with school system advocates Tuesday over a proposal to increase the county’s recordation tax.

The proposal introduced by County Council President Nancy Floreen calls for increasing portions of the tax—which is applied to home sales and mortgage refinances in the county—in order to generate an additional $185 million in revenue over the next six years.

Local real estate agents who spoke during a council public hearing on the proposal said it would hurt first-time home buyers in the market and may have a negative effect on the overall real estate market.

Peg Mancuso, the president of the Greater Capital Area Association of Realtors, which represents about 10,000 Realtors in the region, said while she supports increased spending on schools, Floreen’s measure would hurt a segment of the population the county is trying to woo—young people buying their first homes.

“We do not believe overburdening those who make long-term investments in the county is either just or prudent,” Mancuso said. “There must be a better way, let’s work together.”

Under the proposal the base rate of the recordation tax—$2.20 per every $500 on the sale price of a home—would stay the same, but the school increment portion of the tax would rise from $1.25 per $500 of the sale price to $2 per $500 of the price. The recordation tax premium, which is only applied to homes sold for more than $500,000 would increase from $1.55 per $500 to $2.30 per $500. For example, a house sold for $600,000 would pay about $1,000 more in recordation taxes under the increase.

Mancuso was one of several real estate agents who spoke against the increase at the hearing.

"We can not afford to add any more barriers to home ownership," Susann Haskins, of Long and Foster Real Estate, said. She noted that buyers face 19 itemized charges they must pay at closing in the county and this will only increase those costs. 

On the other side of the issue, several school system advocates encouraged the council to pass the measure.

“Funding increases for our schools has not kept pace with our growing enrollment,” Lisa Siegel, the president of Takoma Park’s Rolling Terrace Elementary School PTA, said. She noted that Rolling Terrace is currently about 153 students over capacity.

Melissa McKenna, of Maryvale Elementary School’s PTA in Rockville, said she would have “done backflips” at the press conference where Floreen first detailed the proposal last month had she been there.

“There are so many school so overburdened with energetic students,” McKenna said.

Other school advocates testified that asking new homebuyers to help foot the bill for increased school spending is reasonable because homebuyers are a significant source of  increasing enrollment in schools.

Enrollment at Montgomery County Public Schools is growing at a rate of 2,500 students per year, but officials have said school construction funding is not keeping pace to ensure buildings can accommodate them.

Floreen has said the increase in the recordation tax will provide the school system’s capital budget with $125 million over the next six years. Additional funds raised by the increase would go to affordable housing and other capital projects, according to Floreen. A County Council committee is scheduled to review the legislation during a work session Thursday.