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.
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.
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.
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.
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.
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.
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.
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.