TO: City Council
FROM:
David J. Deutsch
City Manager
DATE: November 6, 2003
SUBJECT: Homestead Tax Credit
The Homestead Property Tax Credit established by State law caps the increase
in taxable assessments each year. As the name implies the tax credit is available
to owner occupied housing only. Rental properties and commercial facilities
have no cap on assessment increases. The counties and municipal corporations
in Maryland may establish assessment increase caps of 10% or less each year.
The City Council chose, approximately twelve years ago, to adhere to the County
Homestead rate. Municipal corporations must notify the Department of Assessment
and Taxation before November 25 of any changes to the tax credit for the taxable
year beginning the following July 1. Failure to notify will result in the
rate reverting to the Homestead Credit percentage established by the County.
The County Homestead Property Tax Credit for FY05 will be 102%. Prince George’s
County has a Charter requirement, which ties its Homestead Tax Credit to the
Consumer Price Index. The County’s Charter provision exacerbates their
TRIM problem, and is illogical since housing values have little connection
to the CPI.
Staff is proposing that the City of Bowie increase the homestead property tax credit to 110%. The proposed change would generate an additional $568,000 in City property taxes in FY05. This amount would partially offset the current loss of $617,000 in Highway User Tax Revenue. FY04 Highway User Revenue is estimated to be $835,000 below the actual amount received in FY02. It was stated at the MML Fall Conference last week that additional cuts are under consideration for FY05.
The attached chart shows the impact of changing the Homestead Tax Credit for FY05 from the County rate of 102% to the recommended rate of 110%. The chart is based on a home assessed currently at $182,701. Staff developed this assessment figure after sampling approximately fifty homes.
The Department of Assessment and Taxation’s report on County and Municipal Homestead Credit Percentages notes that of twenty-seven cities and towns in Prince George’s County, fifteen have adopted the 110% tax credit, two towns are at 105% and the remainder of the cities at the tax credit percentage set by the County. As an example, the City of Greenbelt is raising its rate to 110% from 105% for FY05. The State has set its rate at 110%.
Staff recommends the establishment of the homestead
property tax credit percentage for the City property tax for the taxable year
beginning July 1, 2004 and subsequent tax years of 110%. Council’s approval
is requested.
O-7-03
EMERGENCY ORDINANCE
OF
THE COUNCIL OF THE CITY OF BOWIE, MARYLAND
TO ESTABLISH A HOMESTEAD PROPERTY TAX CREDIT PERCENTAGE
FOR THE FISCAL YEAR BEGINNING JULY 1, 2004
WHEREAS, Section 9-105 (e) of the Tax-Property Article of the Annotated Code
of Maryland, provides that on or before November 25th of any year, the governing
body of a municipal corporation may set or alter a homestead credit percentage
for the taxable year beginning the following July 1 and any subsequent tax
years; and
WHEREAS, Prince George’s County has established a tax credit percentage
of 102% for the taxable year beginning July 1, 2004; and
WHEREAS, due to uncertainties with the State of Maryland’s fiscal condition
and the reduction in State Shared Revenues in FY04, the City may sustain further
losses of State Shared Revenue in FY05; and
WHEREAS, Section 9-105 requires the City to establish a homestead property
tax credit percentage for the City property tax for each taxable year under
certain circumstances; and
WHEREAS, State law further provides that if the City does not set a rate,
by law, as required, that the percentage shall be the percentage as set by
the County; and
WHEREAS, the City Council desires that the homestead property tax credit beginning
July 1, 2004 and subsequent tax years shall be 110%.
WHEREAS, pursuant to section 9-105 (e) of the Tax-Property Article of the
Annotated Code of Maryland, municipal corporations must notify the State Department
of Assessments and Taxation of any action taken on or before November 25 preceding
the taxable year for which to action is taken.
Section 1. NOW THEREFORE BE IT ENACTED, by the Council of the City of Bowie,
Maryland, that the homestead tax credit percentage for the City of Bowie shall
be 110%, effective July 1, 2004.
Section 2. BE IT FURTHER ORDAINED AND ENACTED, this Ordinance is hereby declared
to be an Emergency Ordinance and, upon its passage by a two-thirds vote of
the City Council, pursuant to the authority contained in Section 12 of the
City Charter, shall take effect immediately upon its enactment, provided that
a fair summary of this ordinance is published at least once within ten (10)
days after the date of passage in a newspaper having general circulation in
the City.
INTRODUCED
by the Council of the City of Bowie, Maryland at a Special meeting on the
10 day of November, 2003.
PASSED by the Council of the City of Bowie, Maryland at a Regular meeting
on the 17 day of November, 2003.
ATTEST: THE CITY OF BOWIE, MARYLAND
By:
_________________________
Pamela A. Fleming, City Clerk
______________________
G. Frederick Robinson,
Mayor
APPROVED AS TO FORM AND LEGAL SUFFICIENCY:
______________________________
Robert H. Levan, City Attorney
HBM/lbg