Howard County Maryland Blog

Local Politics and Current Events

A Fox/Merdon Aging in Place Property Tax Proposal

Posted by David Keelan on Monday, August 14, 2006

Update: I didn’t have all the details yesterday, just a heads up of what was to come.  See my new post on this issue.

This afternoon Chris Merdon proposed Property Tax legislation for Howard County Senior Citizens based upon actions of the General Assembly session of 2006.  I am glad he siezed upon the opportunity to help this important segment of our community.

Over the past few years attempts have been made to assist Howard County Senior citizens with an escallating tax burden, especially where property taxes are concerned.

On Feb. 23, 2005 our Howard County delegation to Annapolis killed Del. Gale Bates’ proposal for a senior citizens property tax break that would have provided homeowners 65 and older a tax credit.  At the time the majority of the delegation thought it should be left up to the county executive and County Council.

Property values and tax assessments have increased dramatically in the County.  The increased tax burden on seniors who live on a fixed income can really put a hurting on them.  Yet they utilize a smaller portion of county services than most.  The biggest example is the school system.  Seniors don’t use the school system yet 65% of their tax dollars go to the school system.  This is great for the county.  We have people paying for a service they don’t use.  We need more people like them.

Our school system continues to grow and we need to be able to support that growth.  We can’t chase seniors out of the county because of property tax burdens.

As a population school age children grew by an additional 18,000 between 1990 and 2000.

Our senior population, 65 and older, is only 18,000 and only grew by 7,000 in the same time period.

School age children outnumber seniors by about 38,000.

Additionally, their are over 65,800 family households in Howard County and most of them attend our schools.  18,000 seniors are subsidizing their education.  Again, this is a good thing for the county and the rest of us because otherwise we would be paying much higher taxes without these seniors.

We need to encourage seniors to stay in Howard County and we need to attract more seniors to Howard County.

This is becoming more and more of an urgent issue as the baby boomer generation continues to age into the senior category.

According to The Business Monthly (August 2003), over the next 15 to 20 years, the population of folks over the age of 60 will reach 70,000 persons, a figure that will far exceed the total school enrollment of all of our children.  Fortunately, the county is preparing for this as reported by a DPZ research report:

This is recognized in the recently adopted General Plan 2000 (I quote/paraphrase) which outlines several policies to ensure adequate housing and services to accommodate this growing population. Action has already been taken on this. The Howard County Zoning Regulations were recently amended in July, 2001 to include a new Planned Senior Community (PSC) District in addition to other changes to more appropriately address the needs for senior housing. In addition, the Adequate Public Facilities allocations chart now includes an annual 250 unit “set-aside” for senior housing in eligible areas of the County’s water and sewer Planned Service Area.

So what do we do to keep seniors and this important tax revenue stream in the county?  I think we have a number of options that could be targeted to seniors that we could consider.

Portability

Keep considering a proposal put forward by a group of GOP candidates for County Council, led by Greg Fox, known as Property Tax Assessment portability.  This would allow a senior citizen moving to a smaller home within the county to continue to pay property taxes at the phased in assessed value of their current home rather than at the full assessed value of the newer smaller home.

As the county zones for more senior housing I am sure that seniors will have more options to relocate to new senior housing units.  So even if you take the Fox proposal and target it toward this segment I think it would be a good idea.

CYTR

Greg Fox also has another idea.  The Constant Yield Tax Rate (CYTR).  The CYTR is a State mandate that sets the property tax rate at a level that will ensure that municiple governments will not experience a decrease in property tax revenue from the previous year by setting the tax rate at a level that will yield the same amount of revenue.  The CYTR for 2007 for Howard County is set at $.978 which is $.036 lower than the current $1.014.  We could propose setting the property tax rate at the lower of either the county rate or the CYTR for seniors.

Tax Freeze

Freeze the property tax payment for seniors over 65 years of age at the current payment.  If they pay $2,000 per year now they will continue to pay $2,000 per year until they sell the property.

What would one, a mix, or all of these proposals cost Howard County?  That is a complex answer.

Housing grew by 20,000 units between 1990 and 2000 (28%) to over 92,000 total units.

Right now we have 18,000 seniors in the county.  A percentage of them live in the same home.  A large percentage of them own their home (72% of county citizens own their homes).  We can only make certain assumptions here.  So for sake of discussion only if we estimate that 55% of seniors still live with a spouse we are talking about 7,200 properties.  Assume that home ownership rates exceed the average of 72% but lets use 72% which meands 10,000 properties (4% of all housing units).  If we can agree on that then we need to only make one more assumption.  Since it is estimated that the senior population will grow to 70,000 by 2023 (388%) then lets estimate that the number of senior properties that would be targeted for property tax breaks would also grow by 388% or to 38,800 units.

Since housing grew by 20,000 units between 1990 and 2000 (28%) to over 92,000 total units then we can assume that over the next 20 years housing stock will grow by 40,000 units for a total of  132,000 units.  I think most people expect that growth will probably outpace the period between 1990 and 2000, but we don’t know.  So suffice it to say that Senior housing could end up being 19% or more of the housing units in the county.

In short, senior housing units targeted for property tax breaks would grow from 10,000(4%) to an estimated 38,800 (19%+) units over 20 years.  However these numbers are inflated.  The growth in senior population would be phased in since not everyone is going to turn 65 or 70 all at once.  Additionally, over the next 20 years many of our current seniors will be deceased and the property will fall back into the normal tax brackets.

This is not scientific, but I think it reveals a trend that families without children will be growing a lot faster than families with children.  In fact the population growth of those under 5 years old is slowing.  The demands on the school system will decrease.  Both groups will continue to pay property and income taxes, and since the population and housing is still growing property and income taxes will be growing too.

Keeping our seniors in place is a great way to manage growth in the county and especially in our school system.  Seniors represent a significant amount of tax revenues for the county.  It only makes sense to keep them here.

Portability

This is the same as a tax freeze except it would phase out. The State of Maryland estimates this would cost Howard County $3.9M.

CYTR

If the average home value is $400,000 in Howard County then the cost to the county would be $140.00 per year per property X 10,000 units = $1.4 M.

Tax Freeze

Like portability this would cost $3.9 million in the first year.  The difference is that we would essentially be exempting these properties from increases in assessed values of their homes as long as they live there (it would not phase out).  In 20 years at the high end of the estimate of 25,200 homes it would cost $30M per year plus any taxable revenue based upon increases in assessed values.  Although we have seen a settling of the hot real estate market and I don’t expect we are going to see any more huge increases in assessed property values anytime soon.  Even Hayduke says so.  

Remember that the senior population will expire, and/or move, and these properties would come back into the regular tax rates, and new properties will continue to be built.  The county would still have a stable and increasing revenue stream.  Given our current $20 million surpluses (not that they will last forever) I think the County can absorb this and have 20 years to adjust the tax credit to meet county needs.

As I mentioned earlier, the General Assemly permitted this type of targeted tax cut in the 2006 session (HB 288).  Here is a newspaper article on what Frederick County instituted.

I think the most meaningful of these proposals would be the tax freeze as described in the House Bill and proposed by Merdon.  Ideally, I would like to see a combination of this and what Greg Fox had proposed in terms of portability and make the tax freeze portable.

Call it the Fox/Merdon – Local Property Tax – Credit for Individuals at Least 70 Years Old combining a tax freeze and making it portable to encourage seniors to age in place (Howard County) would be (in my opinion) an ideal solution. 

Anyway, I am glad to see Merdon and Fox looking for creative ways to help our seniors age in place in Howard County.  As like minded individuals I think they will make a great team in County government.

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10 Responses to “A Fox/Merdon Aging in Place Property Tax Proposal”

  1. Hayduke said

    Right now we have 18,000 seniors in the county. A percentage of them live in the same home. A large percentage of them own their home (72% of county citizens own their homes). We can only make certain assumptions here. So for sake of discussion only if we estimate that 55% of seniors still live with a spouse we are talking about 7,200 properties. Assume that home ownership rates exceed the average of 72% but lets use 72% which meands 10,000 properties (4% of all housing units).

    The math’s not perfect, but I guess it’s close enough. As for the language and assumptions, you lost me.

    What about the current “circuit breaker” tax option for seniors faced with growing housing costs? What can you tell us about that?

    Also, why limit our discussion of mitigating tax burdens to seniors, especially since a program is already in place for them? As someone whose mortgage is increasing substantially this month because of an unnaccounted-for-at-closing assessment jump, it’s a bit of a touchy subject. After all, I’m subsidizing your kids’ education, as well — though I suppose you can say I’m just paying everyone back for subsidizing my education (but that doesn’t make for compelling, controversial and compartmentalized interest-group politics).

  2. melissa said

    I’m glad to see this brought up again – but we need to make sure it’s not just a deferral of taxes. (Haven’t read it very closely yet – so don’t jump on me if it’s clearly in the text – just getting in from knocking on doors…)
    But it doesn’t do us very much good if we keep our seniors only to lose their children who inherit the house. They are likely close to being seniors themselves and are desirable for all the same reasons.

  3. Today at 1:00pm, Chris Merdon, Charlie Feaga and Wayne Livesay hosted a press conference at the Ellicott City Senior Center to announce a true tax reduction for our seniors. No one else was part of the presentation. Maybe I’m reading this blog wrong but it seems to indicate someone else was there. Sorry, but integrity means a lot to me.

  4. hocomd said

    At the time of the post I was unaware that Charlie and Wayne were co-hosting a press conf. with Chris Merdon.  The notice to volunteers/supporters dated August 12th, 11:00AM didn’t mention it either.  Check with Tim Feaga as he was on the distribution list.

    However, I do believe that you misread the post.

    Perhaps the heading is a little misleading. Please don’t read it like one would read a newspaper headline. This is after all a blog and not a newspaper.

    The post was about coupling the proposed tax cut presented today with a number of initiatives and tax cuts that Greg Fox has already proposed (without prompting from the General Assembly – although I understand Chris goes a step further).

    My post only was saying that I believe taking Chris’ proposal combined with Greg Fox’s proposals would make a fine Fox/Merdon tax cut proposal.  I hope they can put their heads together on something soon.  Greg has a lot of original ideas and coupled with Chris’ experience we have a great team there.

    I hope that clears up any issue related to integrity.

  5. hocomd said

    Hayduke, you are right. It should have read that about 75% still live with a spouse.

    Anyway, “Talking Taxes” at http://www.ctj.org/blog has this about Maryland’s Circuit Breaker Tax Credit.

    Outreach 101: Talking Up Low-Income Tax Credits in Maryland

    If you provide a low-income property tax credit and nobody claims it, is it really there? In a legislative hearing yesterday, Maryland lawmakers and legislative staff discussed options for expanding the state’s Homeowner Property Tax Credit. This is a laudable goal: like other states’ circuit breaker-style property tax credits, the PTC is designed to provide the greatest possible “bang for the buck” by targeting property tax relief to those low-income homeowners for whom tax bills are especially large. But there is one bad thing you can say about this type of tax credit: you have to apply for it. Low-income homeowners who don’t know about the credit are out of luck.

    As it turns out, Maryland tax administrators take some steps to promote this credit. Gas and electric bills sometimes contain reminders that “you may be eligible for a tax credit,” and the income tax forms that get mailed out to every wage earner in the state contain this full-page announcement (although to find it you have to read all the way through to the very back of your income tax instructions, behind the tax tables).
    This is smart. But is it smart enough? No one knows, because no one knows how many eligible low-income Marylanders fail to claim the credit.

    Most states offer a similar tax credit to their low-income homeowners (and, in some states, renters). Good-government advocates across the nation seeking to improve the fairness of these low-income credits could start by asking their lawmakers and state tax administrators the same question that came up in yesterday’s Maryland hearing: what are you doing to ensure that eligible people claim this credit?

    Here is a publication on the matter: http://www.itepnet.org/pb10cb.pdf

    To sum it up, do you think Seniors are going to be aware of or apply for a “circuit breaker” and do you think they should have to apply for a tax break? Haven’t they earned it?

    Additionally, Maryland Budget and Tax Policy Institute (focus is how policy decisions affect low- and moderate-income families, vulnerable populations, and the important community programs that serve them) states “Sales taxes, excise taxes, and property taxes – which together account for about 55 percent of all state and local taxes in Maryland – all are more costly for low income taxpayers than for high-income taxpayers.” I think Seniors 70 and older on a fixed income and barely getting by fall in this category and need help. Merdon and Fox see that…

    Finally, thanks for the subsidy. Seniors already paid for school, and they still do. We aren’t talking about all seniors either. We are just talking about the one’s that fall below a certain income category. The story is as old as dirt. Seniors on fixed incomes who can’t pay their taxes, have to sell and move, or have a tax lien placed, and the house is sold at a tax auction, the new owner kicks them out. I seem to recall a recent story about that happening here in Howard County.

  6. Jim Adams said

    David, I read this, yesterday afternoon, the same way Wayne Livesay read it. When I got home from work a news reporter called, and as we talked I realized it was Livesay, Merdon, and Feaga who held the press conference. I called Mr. Feaga and confirmed that.

    I know, as most of your readers do, that you support Greg Fox, that does not present a problem to me, I still find your blog to be good reading.

    But believe it or not, your gift of good writing and your intelligent approach to the subject, result in a responsiblity to your readers that you may have missed this time.

    If I win in my run for the council, I expect you to call me to task, when you feel I have made a mistake, and I hope to accept your thoughts as constructive and objective.
    So I hope you take this comment in the same way. Thanks again for allowing me to express myself.

  7. somebody said

    The “portability” scheme is in all likelihood unconstituional. As far as i can tell, it’s not used anywhere in the country. The only place it’s been pushed, is Florida, but the proposals there are in the form of contitutional amendments.

  8. hocomd said

    Jim, as I stated earlier.

    When the notice to Merdon volunteers/supporters was sent out it made no mention of Charlie or Wayne. In fact today’s papers don’t mention Wayne as a co-host of the press conference either – we only have Wayne’s statement in the Sun, and now the record of your conversation with a reporter. The Sun does mention that Wayne said he suggested the legislation to Chris, the Examiner does not.

    I make no claims that Greg Fox was “part of the presentation”. I only said that Greg had viable tax proposals that had been reported in the press previously and suggested that Chris and Greg collaborate on combining them. Wayne, Charlie, Chris and Greg could certainly work together in the interest of Howard County Citizens to do so.

    I can only write what I know about at the time I am writing about it. Had I been priveledged to the information at the time I would have written about it. Now I find that I am anxious to see Chris’ press release to see how it describes the proposal and the principle parties.

    Thankfully, the comments section allows readers to clarify the record.

  9. Jim Adams said

    Thanks, David

  10. Fran said

    I think they should remove any income limits on such a tax freeze bill. We don’t want wealthy seniors leaving either!

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