Transfer tax rise mulled to fund school-building

Real estate rate increase could offer $215 million

Tentative plan drafted by Robey

Legislators open to idea, wary of borrowing money

Howard County

January 05, 2003|By Larry Carson | Larry Carson,SUN STAFF

An ambitious plan to raise $215 million to quickly build more than 100 Howard County classrooms and solve a school funding crisis is being offered by County Executive James N. Robey.

The tentative proposal to increase the real estate transfer tax by one-half of 1 percent to fund school borrowing is the first significant proposal by a local government to pay for a state mandate to provide all-day kindergarten by 2007 in the face of Maryland's budget woes.

State school construction aid is expected to decline sharply because of an expected $1.8 billion combined revenue shortfall for the current and coming fiscal years. At the same time, Howard school enrollment is growing by more than 1,000 students a year, a pace that spurred the school board to request $86.3 million for construction next year - a 55 percent increase in a single year.

The county is committed to building a $48 million high school, plus adding several elementary schools in the crowded Ellicott City area and at least 60 kindergarten classrooms in school board proposals for construction totaling $216 million through 2009.

A tax increase to fund all that building with $215 million in bonds is Robey's solution.

State legislators whose approval is needed for the real estate transfer tax increase that would fuel the plan are reacting cautiously, and Robey declined to talk about the proposal late last week.

School board Chairwoman Sandra H. French said she's "heaving a huge sigh of relief" over what she called "a responsive and responsible reaction" by Robey.

"The tension and anxiety that grows as our capital budget needs grow has to be relieved some way," she said.

The real estate transfer tax increase would add $1,250 more to closing costs on a $250,000 house. The estimated $10 million a year in revenues from the increase would be used to borrow $30 million annually for seven years, plus an additional $5 million in the final year. The tax revenue would go to pay off the debt by 2031.

The transfer tax would rise from 1 to 1.5 percent - equaling the rate in Baltimore and Baltimore County, and just surpassing Prince George's County's 1.4 percent.

Splitting the funds

Under the proposed formula, schools would get half the transfer tax proceeds, and the rest would be split between recreation and parks, agricultural preservation, the Fire Department and housing programs - including one to reduce home sale closing costs.

If enacted, the plan would create a separate fund outside normal county bond borrowing to build and renovate classrooms by taxing sales of new and existing homes that are producing the new students.

A two-year school board study showed that slightly more than half of the county's new students come from households that bought existing rather than new homes, according to a nine-page draft of Robey's proposal created by the county budget office.

Though the county executive hasn't formally announced the plan, said spokeswoman Victoria Goodman, he is "trying to find a [funding] source that's equitable" to keep up with burgeoning school construction costs.

Robey, a Democrat, campaigned for re-election last year saying he had funded every classroom the school board asked for - a reflection of the commonly held belief here that the county's top-rated school system is what drives Howard's economy.

And although some are worried about borrowing more money, no one is flatly opposed.

"Our schools are the beating heart of every community and neighborhood," said Rick LaRocca, Howard County Association of Realtors president.

LaRocca said he is worried about the effect increasing settlement costs for county homes will have on affordable housing.

"I'm anxious, but I'm not against anything until I hear the whole story. We'll work this out," he said. Members of his group are to meet with Robey tomorrow.

Budget director Raymond S. Wacks said the proposal creates a "relatively guaranteed source of revenue" for the borrowing, which won't affect county general property or income taxes.

Impact fees rejected

In the draft, Robey rejects impact fees because they are limited to new homes and to the area where a new development is forcing crowding. Aside from three large mixed-use projects planned for southern Howard along U.S. 29, the years of big developments are over, the draft asserts.

Wacks also noted that transfer taxes are usually split between buyer and seller, are negotiable, and the county has a housing program for low- and moderate-income homebuyers to ease closing costs.

But legislators are wary of any tax increase, especially one that would make buying homes more costly in a county renowned for expensive homes.

"I haven't decided one way or the other," said the county's House delegation chairman, Del. Frank S. Turner.

Turner said the delegation will hold a public hearing next month in Ellicott City if Robey formally proposes legislation. Del. Shane Pendergrass, another Democrat, said she is undecided, but willing to listen.

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