Tax break for homes increased by council

Rising property values, nearing election precede change in credit program

October 23, 2002|By Lynn Anderson | Lynn Anderson,SUN STAFF

Anne Arundel County residents - many of whom were facing higher property taxes because of a significant increase in local property values - may pay slightly less in taxes than they expected under an election-year rejiggering of a local tax credit program.

County Council members used their last meeting before the Nov. 5 election to impose a 2 percent limit on the annual increase to homeowners' taxable assessment, down from the current 4 percent limit.

Annapolis and Prince George's County are considering similar moves in response to a boom in local home values.

The tax break - while welcome at a time when the national economy is foundering and some residents have lost their jobs - won't amount to much in terms of money saved.

The average county homeowner will save about $153 under the 2 percent limit in the coming tax year, which begins July 1, officials said. (Under a 4 percent limit, the average homeowner would have saved about $119, for an average net benefit of $34 from the council's action.)

The average home value in the county, not including Annapolis, is $180,000.

Homeowner savings countywide are expected to total $16.5 million.

The tax break won't lead to a drop in tax receipts; overall residential and commercial property tax revenue is expected to increase, according to some estimates, by as much as 8 percent. That could trigger further tax breaks under the county's tax cap.

Council members, who initially balked at the proposal because it seemed that business owners would have to pick up the tax slack, said they were reassured of the tax credit's benefits after meeting with county finance officials. Members of the business community, who were notified of the change, didn't complain. Commercial real estate is assessed on the basis of income generated, not land value.

"This is a way to balance the disparity between the increase in assessments for commercial and residential properties," said Barbara D. Samorajczyk, a Democrat from Annapolis, who voted with five other council members Monday to adopt the change.

Officials maintained the tax action was not timed to appeal to voters, noting that the state requires jurisdictions to make adjustments to local "homestead tax credit programs" by Nov. 15.

Six of the seven council members and County Executive Janet S. Owens, a Democrat from Millersville, are up for re-election.

Additional tax changes could be around the corner. County elected officials may be forced to cut the tax rate as required by the voter-approved tax cap, which limits growth in overall property tax revenue to 4.5 percent or the rate of inflation, whichever is lower. County officials expect to receive inflation rate information from federal sources in the spring.

Owens and the council cut the property tax rate from 96 cents to 95 cents per $100 of assessed value when they adopted the 2002-2003 budget in May.

The total number of homeowners who are expected to qualify for the tax credit - residents whose homes have risen more than 2 percent during the past year - is estimated at about 115,000. That's about 27,000 more than would have been eligible under the county's old homestead credit program, which limited an increase in taxable assessment in any year to 4 percent.

The last time the county adjusted the homestead tax credit program was in 1994, when the council voted to change the limit from 10 percent to 4 percent.

Annapolis officials have proposed changing the city's tax credit program from 10 percent to 4 percent. The issue will be discussed at a public hearing Monday.

"Basically, we are trying to mitigate the impact of reassessing properties," said John R. Hammond, the county budget officer.

The state reassesses property values once every three years for tax purposes. In recent years, home values in the northeastern and northwestern regions of the county have risen on average 14.8 percent and 20.4 percent, respectively, over a three-year period, according to figures provided by the county budget office.

A more recent reassessment of homes located in Annapolis and in the southern section of the county showed that property values have increased in that area by as much as 40 percent or more over the past three years, Hammond said.

The homestead tax credit program is one of many offered by the county. Recently, the council established a tax credit program for businesses willing to redevelop old and abandoned structures located within designated commercial revitalization areas. The council also has set up a foreign trade zone tax credit program in the past year.

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