County warns 4 tax drop will cost a fortune Tab expected to hit $5.6 million in '94

June 04, 1993|By John Rivera | John Rivera,Staff Writer

The additional 4-cent drop in the property tax rate approved in the budget last week will cost Anne Arundel County $5.6 million next year, officials said.

But the real sting will be the cumulative effect of that tax cut, which will cost $38 million over the next five years, according to figures released this week by the county Budget Office.

County Auditor Joseph H. Novotny, the proponent of the 4-cent drop approved by the council, does not dispute those figures.

He offers a solution to allow County Executive Robert R. Neall to make up the difference: Raise the income tax by 2 percent.

"If he's worried we cut the tax rate too much, let him raise the tax he can raise. Let him raise the income tax," Mr. Novotny said. "That way he'll have a percentage increase."

Such a move was recommended last year by a commission appointed by Mr. Neall to study property taxes, but the county executive has refused to increase the "piggy-back" income tax from the current 50 percent.

Mr. Neall "has no intention of resorting to that at this point," said Louise Hayman, a spokeswoman for the county executive. "It would be a last-resort measure. It would be like robbing Peter to pay Paul."

The executive is concerned that the lower tax rate, coupled with the tax cap approved by county voters last year, could threaten Anne Arundel's good bond rating when the New York agencies come to Annapolis to review it this month.

Losing its AA+ bond rating could cost the county millions of dollars in higher interest rates.

"I want to do my very best to plead my case that we're doing the best we can," Mr. Neall said. "I don't think [the council] strengthened my hand."

Mr. Neall submitted a $668.6 million budget to the council last month that lowered the tax rate by 4 cents, to $2.42 per $100 of assessed value.

But several County Council members told Mr. Novotny, who makes budgetary recommendations to the body, that they wanted to drop it even further, by 9 cents.

Mr. Novotny came up with $5.8 million in cuts to the operating budget, which included eliminating $2 million that had been earmarked for Solley Elementary School.

That was enough to cut the rate by 8 cents, to $2.38.

The revenue loss is compounded by the tax cap passed by voters in November, which limits the increase in total property tax revenue the county can collect each year to 4.5 percent or the rate of inflation, whichever is less.

The effect of the tax cap will be to compound in future years the $5.6 million the county will lose because of the additional 4-cent drop in the tax rate.

The limited rise in property tax revenue mandated by the cap will be calculated on a smaller base.

Under this scenario, the tax cap -- which the county will comply with by lowering the tax rate 4 cents and limiting assessment increases to 4 percent -- will cost the county $9.1 million in lost revenue in 1994.

The additional 4-cent tax rate reduction approved by the council will cost $5.6 million, for a total of $14.7 million in lost revenue.

The next year, the tax cap and lower tax rate account for a $21 million loss of revenue.

By 1999, the county estimates it will have lost $197 million -- including $38 million from lowering the tax rate by 4 cents and permanently lowering the tax base.

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