McCarthy Proposes Property, Income Tax Increases in First ‘Balanced’ Cecil County Budget in Decades; More $ for Cops, Library but Nicks School Budget
Cecil County Executive Alan McCarthy has proposed his first budget that breaks with years of deficit-financed spending policies in the county but takes the politically risky road of raising property and income taxes to pay for county services. Property taxes would rise by $100 a year for a home valued at $200,000, while local income tax rates would rise from 2.8 percent to 3 percent.
McCarthy’s budget is a landmark fiscal blueprint in recent county budget history, clearly setting out the costs of services that county citizens have demanded—for schools, libraries and public safety—and asks county residents if they are willing to put their money where their mouths are. Unlike the past four budgets advanced by his predecessor, Tari Moore–which relied on substantial drains on reserve funds accumulated over many years as safeguards against fiscal and weather emergencies– McCarthy’s budget is fully funded by actual revenues expected in the Fiscal 2018 budget year, which begins 7/1/2017.
“This is my budget,” McCarthy said in announcing his proposals on Friday (3/31/2017.) “I will take full responsibility, be you like it or like it not.” McCarthy was sworn into office in December, 2016.
County budget officials calculate that the “unassigned fund balance” reserve funds balance stood at $15 million before Moore took office but are now estimated at about $6 million, although the current budget year is not yet over. Moore’s budget proposals actually tapped up to $14 million, or virtually wiping out the reserves, but offsets, County Council budget cuts and some lower than budgeted expense costs year-to-year put some money back into the reserves.
McCarthy said the county’s raids on the reserve funds were “not sustainable” and “the pillaging of reserve funds…must stop.” He noted that for the past 20 years, county budgets have not been balanced and all relied in some measure on tapping the reserve funds. “The well will run dry,” he said.
“…The services requested by citizens and the continued movement of state and federal government costs onto local government means that the only way to produce a truly balanced —zero deficit—budget is to act and act now,” McCarthy said in outlining his budget plan.
McCarthy’s budget is fully financed by actual revenues expected to be received in the Fiscal 2018 budget year, which begins on 7/1/2017, and to do so he is advancing a pay-as-you-go philosophy that must be reviewed and evaluated by the County Council. The Council cannot increase spending but is free to cut spending and to set its own lower version of the property tax and income tax rates. The budget bills will be introduced at the Tuesday 4/4/2017 evening Council meeting.
The Council will hold a series of budget workshop meetings, at which members will questions department heads about their proposed budgets, and a public hearing will be held at Elkton High School on 5/23/2017. The Council is expected to vote on the budget on 6/6/2017.
Highlights of the budget proposal include:
The proposed budget would boost the local “piggyback” income tax rate from the current 2.8 percent to 3 percent, effective 1/1/2018, since income taxes are collected on a calendar year basis while the county’s budget operates on a mid-year to mid-year Fiscal Year calendar. The income tax rate change is projected to yield $2,056,000 for the Fiscal 2018 county budget year. The local Cecil County income tax rate has not been changed since 2001.
The state collects the local income taxes as a “piggyback” on Maryland income taxes and distributes the funds collected to the local counties. The highest local income tax permitted under state law is 3.2 percent, a rate that is not only assessed in the largest jurisdictions—like Baltimore City, Montgomery County, Prince George’s County and Howard County—but also in more rural areas on the Eastern Shore, such as Queen Anne’s County, Somerset County and Wicomico County. In nearby Harford County, the local “piggyback” income tax rate is 3.06 percent, still higher than the proposed figure for Cecil County. County governments decide what local income tax rate to impose.
Business income tax rates are the same as individual rates in Maryland, so a boost in the local tax rate imposes a similar burden on businesses.
Income tax revenues have been “soft” in the past year or two in Maryland, forcing the state government to downgrade its revenue forecasts twice in recent months. Cecil County’s income tax revenues held steady due to the influx of construction workers to the new Old Dominion power plant construction site in Conowingo, but the project is due for completion this spring and only a handful of permanent workers will remain, and pay income taxes, in the upcoming fiscal year. Thus, the county would face a sharp drop-off in income tax revenues for the new Fiscal 2018 budget year under current rates.
The proposed McCarthy budget calls for boosting the local property tax rate from the current 0.9914 per $100 of assessed property value to $1.04—an increase of 5-cents. That change is expected to boost county revenues by $5.2 million over current levels.
For homeowners whose property is assessed by the state Department of Assessments and Taxation at $200,000 in value, the change would mean a $100 a year increase in property tax payments.
County property tax rates have essentially been frozen for the past four years, even as costs of operating local government and state mandated pass-through costs—such as a shift of teacher pension costs from the state to the counties—have boosted county expenses. In addition, property value assessments dropped after the 2008 recession and are only recently beginning to recover, meaning that properties were considered to be worth less so there was less assessed value upon which to impose county taxes.
McCarthy said that both the property tax and income tax rates proposed in his budget are lower than those of nearby Harford County and the property tax rate would be lower than that of the other adjacent county, Kent County on the Upper Shore.
The county tax on hotel room stays would rise from 3 percent to 6 percent. That would match the hotel room tax imposed in nearby Harford County.
The largest spending item in the overall county operating budget is the allocation of money to the Cecil County Public Schools (CCPS). Supporters of the schools are always the loudest advocates at annual budget hearings and the parents of students and county teachers are well-organized to make their case.
For the new budget, CCPS proposed a nearly $12.5 million increase in total operating funds and small maintenance projects over the current budget, from $81.6 million in Fiscal 2017 to $94.1 million in Fiscal 2018, according to the detailed budget documentation submitted to the Council. But McCarthy cut the overall total to $82.9 million, or a 1.6 percent increase, of $1.3 million, over the current budget year total.
Just for regular educational operating costs, CCPS sought a $3.3 million increase, but the county executive scaled that back to a nearly $1.1 million rise. McCarthy said that his proposal was over $1.7 million above the state-mandated “maintenance of effort” level of county aid per student, a requirement that the county must spend at least as much as it did in the previous year per student.
CCPS officials have been complaining for years of a backlog of maintenance projects needed at the county’s many aging schools, estimated at up to $50 million in deferred maintenance projects. Their budget proposal sought to tackle a huge chunk of that backlog in just one year: going from about $1 million in “small capital” maintenance projects in the current budget year to a whopping $10.2 million in just one year for Fiscal 2018, according to the detailed budget resolution submitted to the County Council.
(While major school construction and renovation costs are covered by the county’s separate capital budget, regular repairs and maintenance costs are handled in the operating budget through the “small capital projects” line item.)
While the huge request could be seen as a political hammer to remind the county of the maintenance backlog, it was clearly unrealistic to expect to be able cross off so much of the “to do list” in one budget year.
But McCarthy’s proposal does cross off one persistent political problem from the CCPS wish list: repairing and resurfacing the tennis courts at North East High School.
Two years ago, tennis court repairs were at the center of one of the most politically unseemly budget fights in recent county history: a scenario before the County Council that pitted repairs of tennis courts at two county schools against a request for funds to buy protective gear, such as bullet resistant helmets, for Sheriff’s Deputies. As it ended up, one school got tennis courts and the deputies got some but not all of their needed funds. (Eventually, Sheriff Scott Adams was able to equip all his force with the potentially life-saving gear through grants and cost savings in other areas of his budget.)
Separately, the county’s Capital Improvements budget provides $11.9 million for six major school construction projects, including continuation of the new Gilpin Manor elementary school construction, boiler replacements at Perryville High and Conowingo elementary, and roof replacements at Cecil Manor elementary, Bo Manor in Chesapeake City, and Providence School.
The Sheriff’s Office will be authorized to hire three new deputies: one each for the sex offender unit, the street level crime unit, and a new position to provide security at the county administration building in Elkton. In addition, the county’s work-release program at the Detention Center, which has conducted a pilot program to release non-violent offenders to home detention with electronic monitoring, will be authorized to hire one staff person to oversee a broader home detention program. The rationale for the position is that is cheaper to provide such supervision alternatives than housing people at the jail.
Overall, the Sheriff’s Office —including law enforcement, detention center and work release/community corrections operations—would receive $22.1 million in operating funds, an increase of $705,463, or 3.5 percent, above the current budget year. In three out of the past four budget years, the Sheriff’s Office was subjected to significant last-minute budget cuts initiated by former County Councilor Robert Hodge (R-5). But Hodge is no longer on the Council, having decided not to seek re-election in 2016.
The Department of Emergency Services will be authorized to add two additional 911 dispatchers and two additional paramedics to the county-employee paramedics program, housed in three stations around the county. (Volunteer fire companies provide “basic life support” ambulance services throughout the county, but the county-employed paramedics provide “advanced life support” services.)
In addition to operating subsidies from the county to the volunteer fire companies, the new budget calls for $325,000 for vehicle replacement projects, including $100,000 each to Perryville, North East and the Singerly fire company in Elkton to buy new ambulances, while the Water Witch company in Port Deposit will receive $25,000 for a new tanker.
Deputies and EMS staff who are covered by collective bargaining agreements will receive negotiated pay boosts, while a new pay scale system for paramedics, based upon rank and experience, will be implemented. Paramedics with less than five years of service will get a 4 percent pay boost.
McCarthy said he is “sick and tired” of losing trained dispatchers and paramedics who leave the county as soon as they have a few years’ experience to join higher-paying jobs in other counties.
“It costs more to train new hires than it does to pay a bit more to retain experienced staff,” he said.
All county employees will receive a 2 percent “step” raise under the county pay scale system for existing members of the workforce.
For the past several years, library advocates—among the most vocal citizens at budget time—have urged construction of a large new library in North East to replace a tiny, outdated facility in the town. While lawmakers agreed on the need for a new library, members of the County Council in particular balked at cost estimates.
But McCarthy’s budget includes $1.3 million in planning and design funds for a new library in the Fiscal 2018 budget, and long-term capital budget plans include the full $18.6 million estimated construction costs for the facility
McCarthy said he viewed the project as an “investment” in the county’s future, and noted it would free-up space at the Elkton main library for citizen patrons. The library system’s administrative offices would move to the new North East library once it is built. Library officials noted that the Elkton library site was limited in size and would not accommodate expansion, so moving the administrative offices to North East was the only way to provide more space for expanded computer spaces and other services for patrons in Elkton.
In Fiscal 2018 operating expenses, the proposed budget would grant a 7 percent spending increase, including the hiring of a part-time small business librarian. The county library system recently won the nation’s highest honor, a gold medal for excellence in library operations, and its existing small business librarian program was cited as an important factor in the award.