Property Values Rise 6% in New State Assessments; Some Help for Cecil County Budget, Home Sellers

The State Department of Assessments and Taxation (SDAT) announced a few days ago that the sluggish real estate market in the state was showing new signs of life, with statewide property value increases for homes of 6.4 percent while business/commercial property values rose 13.6 percent. In Cecil County, assessments in one-third of the county rose by 6.1 percent for homes and 6 percent for business/commercial properties. The property value rise could generate over $100 million in additional taxable property value and perhaps an extra $1 million in revenues, even after accounting for “homestead” tax credits for full-time residents owning their homes.

Gary Duffy, supervisor of the Cecil County office of SDAT, said that the “group 2” area covered by the latest round of new property assessments generally covers the northernmost section of the county above I-95, from the Fair Hill area near the Delaware line and west toward Conowingo and included the Rising Sun area. The south county and lower Elkton were covered in the “group 1” reassessments conducted in 2015. The Perryville, Port Deposit and town of North East areas will be re-assessed in 2017, he said. Under state law, one-third of county properties are re-assessed for tax purposes each year.

The state of Maryland determines the values of local properties, and the county government determines the local county tax rate. If property values rise, the county may have more potential income but local elected officials decide whether to cut, retain or increase tax rates. However, state and county laws limit the amount of an assessment increase that can be passed on to local homeowners. Cecil County limits the pass-through to just 4 percent of an increase for full-time resident homeowners in a single year, while in other areas of the state as much as 10 percent of an assessment increase can be counted.

In raw numbers, the latest SDAT data illustrates the fundamental problems of the Cecil County economy: most of the property values in the county, on which local taxes are based, are residential homes while business properties are a much smaller proportion of the taxbase. That means that homeowners pay the bulk of county government expenses, while business bears a much smaller proportionate cost.

In the latest SDAT re-assessments, homes in the “group 2” reassessment were valued at $2.5 billion, while business properties accounted for $494.9 million. Geographically, the re-assessed area includes the W.L. Gore & Associates facilities and the Rock Springs power generation site, among the largest and most valuable business properties in the county, but other businesses are few and far between in the area.

Overall, SDAT calculates that the Cecil County taxbase (residential and commercial properties) for the budget year beginning 7/1/17 amounts to $9.4 billion, up by over $130.5 million from the Fiscal 2016 budget year. (But the “homestead” tax credits and other homeowner protections reduce the impact of potential tax increases by over $12 million.)

Under current county property tax rates the new assessment estimates could boost county coffers substantially—perhaps by about a million dollars– if property tax rates remain the same, but county officials caution that the state calculations for revenue estimates have been wrong in the past.

“We’ll have to take a close look at it,” Al Wein, the Cecil County Director of Administration, said. But last year, the county relied on state property tax revenue estimates and “we came up short,” Wein said.

County Executive Alan McCarthy, sworn into office less than a month ago, said his administration welcomed rising home values as part of the county’s economic recovery but added he was concerned that homeowners are still paying a larger share of the costs of local services “We need to expand our business taxbase, and I’m committed to doing that,” McCarthy said. “We expect to have some new business opportunities soon, and we will work hard to broaden our economic picture with new jobs and revenues to support our local economy,” McCarthy said.

The new state report on property values and on-the-ground experience by local real estate professionals indicate a cautiously optimistic picture in the county. Cecil County real estate tracking reports for 2016, through 11/29/16, show a slight boost in home sales prices, shorter times on the market before a home sale is closed, and smaller discounts from list prices for sold homes. But the numbers also show the local housing market is still recovering from the 2008 housing market crash and is still below the boom year level of 2005.

In the 2016 data for Cecil County, there was a 15.1 percent rise in the number of closings over the same 11-month period in 2015. Median home sales prices rose slightly, to $199,900, up from $198,900 in 2015. Final sales prices also came closer to seller’s asking prices, with 2016 sales coming in at 92.8 percent of the list price, in contrast with 88.7 percent in 2015. And houses sat on the market for less time in 2016: 89 days, in contrast with 103 days in 2015.

While the local picture is improving, the residential housing market still falls short of the 1,446 home sale closings in 2005, but much better than the rock bottom level of just 704 closings in 2008.

For many homeowners, the latest positive news may show a way out of the troublesome “underwater” problem that has trapped families in homes that are worth less than their debt on the property. “Underwater” means that families have outstanding mortgages that are higher than the current value of their homes—with the result that they could not sell the house without losing often substantial amounts of money. Homeowners faced with “underwater” problems may have been trapped in houses they could not sell without serious financial losses, or were forced to walk away from their homes through foreclosures after job losses.

Chris Cashman, sales manager of the Elkton office of the Pattterson-Schwartz real estate firm, told Cecil Times that foreclosures and “short sales”—in which banks decide whether to approve a sale for a lower price than the outstanding amount of the current mortgage—are on the decline in the county. Such properties were “a big problem” in the county in the past few years, Cashman said, but those issues are on the decline.

“If someone bought their house in the 1990s and didn’t treat it like an ATM to withdraw money” such as through home equity lines of credit, “they should be fine now,” he noted, especially since they have had a few more years to pay down the mortgage balance.