Arundel opinion broadens tax cap to business

December 16, 1992|By John Rivera | John Rivera,Staff Writer

The property tax cap overwhelmingly approved last month by Anne Arundel voters applies not just to residential property, but to all property, according to an opinion issued yesterday by the county law office.

As a result, the biggest beneficiaries of the cap -- which limits the increase in total property tax revenue each year to the rate of inflation or 4.5 percent, whichever is less -- will be large commercial property owners, county officials said. It also means the county has even less potential for generating property tax revenue than the man responsible for the cap had intended.

"They're cutting their own throats," said Robert C. Schaeffer, president of the Anne Arundel Taxpayers Association and author of the tax cap. "If they want to interpret it that way, that's their dumb mistake."

Mr. Schaeffer had worked with county officials from the beginning to draft the ballot question that passed. During the campaign, opponents of the tax cap raised the possibility that it would be a boon to businesses, but Mr. Schaeffer denied that it would apply to them. And the county stayed mum.

Mr. Schaeffer said his intent, and the intent of the voters, was clearly to limit the taxes just on residential property, even if that was not stated in the wording of the amendment.

"I think that whatever comes out of the Arundel Center regarding the tax cap is to be regarded with extreme suspicion," he said.

The opinion was prepared by County Attorney Judson P. Garrett Jr. and Deputy County Attorney David A. Plymyer at the request of the budget office, which submitted eight questions that needed resolving before next year's budget could be formulated.

According to the opinion, state law clearly holds that the amendment must be interpreted literally, unless its meaning would be absurd or illogical. The charter amendment approved by county voters stated that revenue should be capped on "properties existing on the County property tax rolls," and does not specify real property.

While saying they had "no doubt" those responsible for the cap intended it to apply only to private homeowners, the county attorneys held its language was "sufficiently generic" to require that it be applied to all property.

The opinion also says the cap does not prevent the county from using property tax revenue that exceeds the cap if it results from the good faith estimate the county used in adopting the annual budget and setting the property tax rate.

The opinion also holds that revenue from new construction, which appears on the tax rolls after June 30 each year, is not included in the cap.

That interpretation would allow the county's tax base to grow.

Saying he wanted to limit the benefit to commercial property owners, County Executive Robert R. Neall two weeks ago proposed limiting to 4 percent the amount of assessment increase on which homeowners can be taxed. This goes a step further than a state program that holds assessment increases to 10 percent.

The county would then lower the tax rate by 5 cents, instead of the 9-cent reduction it had planned to keep the revenue under the cap. But the assessment cap would allow homeowners to realize more savings than commercial property owners.

According to a budget office analysis, Baltimore Gas & Electric Co., the county's largest commercial property owner, would save $1.04 million in taxes as a result of the tax cap. But under the 4 percent assessment cap, with its higher tax rate, the utility would only save $580,000 in property taxes.

Chesapeake & Potomac Telephone Co. of Maryland, the county's second largest commercial property owner, would save $156,000 under the tax cap, but only $86,000 under Mr. Neall's assessment cap.

That may sound good, Mr. Schaeffer said, but a homeowner will benefit from the assessment cap only if a property's assessment increases more than 4 percent. That may happen among high-value properties, like those on the waterfront, but assessments are likely to stay flat or go down in more modest neighborhoods.

As a result, homeowners in those modest neighborhoods lose out on the lower tax rate they would have received with the 10 percent assessment cap.

"It would probably give me a break," said Mr. Schaeffer, whose house sits on Dividing Creek in Manhattan Beach, "but it would screw the guy up the street and across the road."

Mr. Schaeffer has written to Council President David G. Boschert, asking him and the other members to postpone the vote on the assessment cap, now scheduled for Monday, for 45 days to allow more study.

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