In explaining his opposition to a proposed increase in Howard County's real estate transfer tax, real estate broker Louis M. Pope named a reason that was misleading in a Tuesday article in the Howard County edition of The Sun. Residents who refinance the home in which they live are not subject to transfer taxes, according to Robert E. Young, associate director of Maryland's Department of Assessments and Taxation.
After meeting with local Realtors yesterday, Howard County Executive James N. Robey formally proposed raising $215 million for school construction by asking state legislators to increase the real estate transfer tax.
"After looking at a number of alternatives, I have found the transfer tax to be the only mechanism that affords us a direct connection with the source of school enrollment increases," Robey said in a statement after the meeting.
A school board study found that more than half of new Howard students result from sales of existing homes rather than new ones.
Rick LaRocca, president of the Howard County Association of Realtors, said after the meeting with Robey that his group would fight the increase. "We don't have a choice but to oppose it - it's about affordable housing and closing costs," he said.
LaRocca said homebuyers already are struggling to produce enough cash for Maryland's high closing costs. "This is not small change," he said.
Robey sees his plan as a solution to a difficult problem: how to build enough classrooms to keep up with growing school enrollments while providing more than 60 classrooms for all-day kindergarten. Meanwhile, state school construction funding is shrinking under the burden of the state's projected $1.8 billion budget shortfall.
The county school board has requested $86.3 million next year for school construction - a one-year increase of 55 percent. The demand for school construction is "far beyond the ability of the county to pay with local bonds," Robey said.
His plan would raise the real estate transfer tax from 1 percent to 1.5 percent, producing $10 million a year in new revenue. The school system now receives $5 million a year from the transfer tax. The new money would be used to borrow $30 million a year for seven years and $5 million in the eighth year. The total debt would be paid off by 2031, under a scenario prepared by Raymond S. Wacks, the county budget director.
After schools, the transfer tax revenue is divided among Recreation and Parks, agricultural preservation, the fire department and housing programs. The increase would add $1,250 to the closing costs for a $250,000 home.
Robey and Wacks believe the transfer-tax plan would provide the county with a longer-term, reliable source of school construction money without affecting the county's general debt load, which is $410 million. By dedicating the half-percent transfer tax increase to pay for the new borrowing, the county could avoid raising the general government debt level to a point that could threaten its coveted AAA bond rating, which allows lower-interest borrowing.
The proposal's future is uncertain. State legislators have kept their distance, promising only to listen and hold a public hearing in Ellicott City next month.
Thomas Ballentine, spokesman for the Home Builders Association of Maryland, noted that school crowding in Howard is caused partly by the county's decision to reduce class sizes - 19 pupils in first and second grades - and the state's requirement of all-day kindergarten by 2007. Those things are not driven by new-home construction, he said. "I think they're on the right track."
Slow-growth activist John Taylor disagreed.
"It's still a new tax, and we're doing it because of overdevelopment," he charged, suggesting that the county eliminate large, new, mixed-use projects instead.
Real estate broker Louis M. Pope, Howard's Republican Party chairman whose Century 21 Trademark Realty company employs 120 Realtors, disagreed for other reasons.
"I hate to see it. It's very targeted and not broad-based," he said, noting it would tax people without children in school and those merely refinancing their homes. "I don't think it's helpful."