Surplus seen as revenue rises

Budget chief's estimate is for an extra $5.8 million

Rainy Day Fund due $3 million

Only a small cushion would remain, panel told

Howard County

December 15, 2004|By Larry Carson | Larry Carson,SUN STAFF

Rising property and income tax revenue should provide Howard County with a surplus at the end of the fiscal year June 30 that is three times higher than last year's -- but still a relatively small financial cushion, county officials said yesterday.

Raymond S. Wacks, the county's budget director, told the county's Spending Affordability Committee that he estimates property taxes will produce $3.7 million more than expected, followed by $1.3 million more from income taxes and $1 million from other levies -- mainly the real estate recordation tax. Investment income, meanwhile, might decline by $200,000, he said.

Of the estimated $5.8 million surplus, about $3 million must go into the county's Rainy Day Fund, Wacks told the committee. The remainder would be roughly three times the $750,000 surplus the budget produced in the last fiscal year, but is still small compared with the $12 million to $20 million surpluses during the stock market boom of the late 1990s.

The committee's job is to recommend to County Executive James N. Robey how much money the county can afford to raise through bond sales for construction projects -- mainly for schools. Robey will hold his annual public budget hearing tomorrow night at the George Howard Building in Ellicott City.

To determine if the county can and should continue authorizing sale of $80 million in bonds per year, the committee members are trying to gauge economic trends and revenue prospects for the next few years, a tricky business at best, most members agreed. Income and housing prices are rising, but no one knows when the next recession might strike.

"Right now, we're dealing with an overheated economy," Wacks told the group during a discussion of property tax revenue. "We're probably getting to a point where housing prices won't increase at the same rate."

Despite that, sale prices now are rising so high that the county can count on up to 7 percent growth in those revenues each year -- despite a 5 percent cap on assessment increases -- even if housing prices were to fall.

Extra property tax revenue comes from sale of new homes, commercial properties and existing homes that change hands each year -- all of which are exempt from the cap.

Because the county has a cap that limits assessment increases to 5 percent, homes worth 35 percent to 50 percent more will take seven to 10 years to reach full tax value, and even a large drop in home prices would not immediately affect revenue growth, Wacks said. "I don't see much impact on housing prices unless mortgage interest rates go to double digits," Wacks said.

"Actual assessment is so far below actual value that taxes won't go down," said Bruce Rothschild, a lawyer.

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