Howard County's main hope for new revenue this decade must rest on growth in income tax collections — despite record-setting job losses during the recession — since declining home values will leave the property tax rate nearly flat over the next few years, county officials said.
In just two years, starting in spring 2007, Howard County lost 6,400 jobs, the first time two consecutive years of job losses have been recorded in the county's history. But regional growth, spurred by federal defense and cybersecurity jobs coming to the nearby Fort Meade area, is expected to turn that around in the next few years, members of a county Spending Affordability Committee heard at a meeting Wednesday.
That's budget director Raymond S. Wacks' hope, because the continuing drop in home values means the county property tax, which accounts for about 53 percent of local revenues, will be nearly flat for the next three years.
"I expect property tax revenues to grow from 1 to 1.5 percent," he told the group, compared with the 6 percent to 8 percent annual increase during the housing bubble.
Despite the lowered expectations, 794 more students showed up at county schools this academic year, school system Chief Financial Officer Ray Brown told the group. Costs for energy, school bus fuel, health care and other expenses beyond the school board's control keep rising, he said, while state and county funding increases have slowed.
That's the problem faced by Wacks and the county's elected officials as they work on a budget proposal for fiscal year 2012, which begins July 1.
Property in the western and southern third of the county that was reassessed for this fiscal year saw values drop an average of 23 percent, said Renee Mierczak, acting supervisor of assessments for Howard County. Property is only reassessed once every three years and the reductions take effect immediately.
"When we cut a property, it stays there for three years," Mierczak said, since one-third of the county is reassessed each year. In addition, almost no new commercial buildings are being built, limiting revenues there too. The best news she had was that things may not get worse.
"The market seems to have pretty much bottomed out," Mierczak said, so assessments should be more stable in the next few years.
But Wacks said there's room for a bit of optimism, as new, high-paying federal defense and cyber security jobs arrive at Fort Meade, and some of those people look for homes in Howard County. According to him, the recession's worst effect on jobs stands in stark contrast with previous statistics. The only other year the county lost jobs was in 1991 during an earlier recession, when 373 jobs disappeared.
The influx of new federal jobs brings hope, Wacks said.
"Personal income tax growth is going to be our only significant growing revenue over the next few years," he said. If that prediction comes true and banks ease their lending policies, the housing market should improve too, he said. Income taxes, the county's second largest source of revenue, represent 36 percent of locally raised money.
"My sense is that there's going to be demand for houses that would drive up home prices again," Wacks said, admitting that, for now, such thinking is "conjecture." With more jobs and homebuyers, the county would collect both more property and real estate transfer taxes in addition to income taxes.
Jeff Bronow, the county's demographic planner, agreed. "I'm amazed at how much development activity is progressing," he said. He brought a chart showing that over the past decade, building permits have been issued for 15,543 new residential units countywide — Ellicott City led the way with 4,476, or 29 percent of all permits.
Together with Elkridge's 20 percent of permits, the two oldest county communities account for nearly half of the decade's new permits, with 21 percent in the southeastern county, 15 percent in Columbia and 15 percent across the rural west.
In Elkridge, there are still more projects waiting for permission to go forward from the county , which is closed to development now under the current growth control laws.
"The county is poised to really start growing again," Bronow said, though there will be more apartments and townhouses built than single-family homes as land becomes more scarce and the downtown Columbia project gets under way. None of that is likely to provide much revenue for the fiscal year starting July 1, however, which is Wacks' main problem right now.
The committee will meet several more times before reporting the fiscal outlook to County Executive Ken Ulman next month. Ulman will present his proposed budget to the County Council in late April.