September 18, 2020

Message from County Executive Marc Elirch

Dear Friends,

Even though at times, the pandemic seems all-consuming, we still have to think about what kind of future we want for Montgomery County. Your vote on the ballot questions in this upcoming general election is going to play an important part in determining the shape of our future. The first batch of mail-in ballots will begin arriving in as soon as ten days and there will be six ballot questions on your ballot this year – four county questions and two statewide questions. And as your County Executive, I will not hesitate to take a position on policies in the public interest.

The four countywide questions are lettered A, B, C and D. I am asking you to vote FOR A and C and AGAINST B and D.  I am also asking that you vote FOR statewide Questions 1 and 2. Today I want to focus on Questions A and B.

Questions A and B address property tax collection. Once again, I urge you to vote FOR Question A and AGAINST Question B, and here is why.

Our County’s property tax structure is fundamentally flawed. The current structure purposely manufactures austerity and creates a system that is broken and broke intentionally. It caps our total property tax revenue to the amount collected in the previous year plus inflation (which most recently was only 1.27 percent); it does not limit individual tax bills to the rate of inflation.  Every year this arcane system forces us to recalculate the property tax rate to fit within an overall number that is not tied to economic growth in the county. As a result, the county does not benefit from increased economic growth even as the county must pay the costs of that same growth.

Due to the economic disruptions caused by the COVID pandemic, if not fixed, this arcane system could bankrupt our county. Unlike residential properties, commercial property assessments are based on the income generated by the property, such as rent. As vacancies increase due to the pandemic, assessments may go down. When combined with an inflation rate that is likely to be zero or negative, Montgomery County could be collecting less revenue than last year – this would be crippling to our budget at a time our services are more important than ever before.

Our current charter simply redistributes who pays more or less.  This is why we don’t have a revenue base that would support more robust school construction or the bond financing needed to build the transit we must have if we’re going to provide the infrastructure that new development requires. Here’s another way to think about it - our problem is not stagnant property values, it is our inability, under the current system, to realize the new value of property.

If you want to understand why we lag behind the other side of the river, you need look no further than counties in Virginia and their ability to produce revenue to build major infrastructure projects that our county’s tax structure makes impossible. This is not about raising taxes. It is about is realizing the benefits of growth for the entire community.

To add another level to the perversity of our system, the use of tax credits to stimulate development activity when combined with new construction winds up reducing property tax revenues, which in turn reduces the base against which inflation is applied.  As a result, the County will never see the full tax benefit from major projects – like the new Marriott headquarters project - even after the tax credits expire. 

Our neighbors (and competitors) in the region are focused on the future for their communities – they are investing in infrastructure that businesses and residents want and need. Our charter prevents us from tackling a range of issues like the opportunity gap in our schools, the need for transportation infrastructure, the lack of affordable housing, and more. It leaves our residents and our business community with the false perception that we cannot manage our resources when, in fact, our potential resources are severely limited by the existing property tax system.

The charter amendment currently in place, which has created this revenue straitjacket, was proposed by the Council 30 years ago – 1990. Since then our school population has grown by 65 percent and overall population by 40 percent. In the last 30 years, we have increased our services and we have more challenges – from traffic congestion to climate change to greater economic disparity. Over the same time period, the tax rate has declined 35 percent.

Don’t be deceived! Our current County Charter limits the growth of property tax revenue – not property tax rates, and resident property taxes are NOT capped at inflation – they are tied to property assessments.

To explain this point, when we looked at actual property taxes bills for a few properties from 2018 and 2019, we found surprising differences in tax increases and decreases that were random. A home in Silver Spring assessed around $600,000 had their property taxes increase significantly; a home in Potomac valued at more than $2 million had a slight tax decrease, and property taxes for a commercial property in Rockville valued at around $370 million saw a tax decrease even though their assessment increased. 

I also want to make a point that both the status quo and Question A require a unanimous vote by the Council to raise the limit – for the revenue cap (status quo) or the tax rate cap (Question A).  Passing Question A will not raise taxes. Question A would – without raising the tax rate – allow us to capture some of the revenue we need to reinvest in our community to move us forward as an economic leader in the region.

Question A allows us to focus on the tax rate rather than the total revenues collected. And the rate cannot be raised unless all Councilmembers vote to raise it. It is simple, and it enables us to capture the economic growth in our county. Additionally, I would note that if Question A passes, our tax rate will still be lower than that of Howard, Prince George’s, Anne Arundel and Frederick counties.

Question B by contrast would take us in the wrong direction. It would keep the current revenue cap and not allow it to ever go above the rate of inflation – even with a unanimous vote by all members of the Council. Put simply, Question B deprives you of your democratic right to representation. Question B could bankrupt our county. In times of emergency or great need, we will not be able to raise revenue beyond the inflation rate. It threatens our AAA bond rating. If we are downgraded, borrowing will be more expensive and will mean we will be unable to provide needed services and amenities. Question B denies us our ability to meet the needs of our residents and businesses – no matter how much we grow the tax base. Question B makes a bad situation worse.

Please educate yourself on these ballot questions. I respectfully ask you to vote FOR Question A and AGAINST Question B.

Marc Elrich
County Executive

PS In my video this week, I talk about current Covid-19 case counts. Also, I want to note that it is Hispanic Heritage Month, which is a reminder of how our county’s diversity makes us stronger and better. Additionally, last week I testified in person to the Maryland DOT about the need to rethink the proposal to expand 495 and 270. Here is a link.

PPS And to those who celebrate Rosh Hashannah – Happy New Year!