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County tax rate jumps

(June 5, 2015) Starting July 1, Worcester County residents will see their property tax rate increase by 6.5 cents per $100 of assessed value to 83.5 cents, and Jan. 1, 2016 will bring a one-half percent hike to the income tax, increasing it to 1.75 percent.

In a 5-2 vote, with Commissioners Bud Church and Joe Mitrecic against, the Worcester County Commissioners officially adopted the fiscal 2016 budget.

Mitrecic said he supported the budget and the tax increases, but the exclusion of funding for raises and cost-of-living increases for county employees and teachers, along with the elimination of an additional $200,000 to Ocean City’s grant, changed his mind.

Mitrecic said the increased grant to Ocean City was not a fix for what the resort sees as double taxation, but would have “gone a long way” to stave off possible litigation. For years, Ocean City has desired a tax differential to offset the taxes resort residents pay for county services they don’t use because resort government provides them.

Instead of a budget request this year, Ocean City officials offered a memorandum of understanding that would phase in a differential.

Church called the budget “short-sighted,” and said it did the most harm to employees who earn the least.

Commissioner Chip Bertino of Ocean Pines, however, said the tight strictures on spending were necessary.

“It’s not going to make everyone happy but does what needed to be done,” Bertino said.

Earlier this year, County Treasurer Phil Thompson delivered the county’s revenue report, which showed that revenues had not recovered from the financial crisis of 2008. Last year was expected to be the “bottom of the trough” with regard to revenue, because Ocean City, representing about 60 percent of the county’s assessable base, was due to be reassessed for 2016 and property values were expected to rise.

But they didn’t. Worcester county is on a three-year cycle of assessments, which means the resort won’t be reassessed until 2019, so the hard times for the county don’t appear to be over.

The flat revenue left the county with less money than it had last year. According to the State Department of Assessments and Taxation, the county had a tax base of $14.86 billion in FY 2015. That number slipped to $14.79 billion for the upcoming tax year. For comparison, the tax base in 2009 was $20.25 billion.

Then there is the matter of the budget stabilization fund, which is money previous boards of county commissioners set aside as a rainy day fund.

The county is projected to use about $8 million from the fund before the current year is over, leaving a balance of between $8 million to $10 million.

But when the county departments and municipalities made their budget requests, the total was $22 million more than projected revenues, meaning the commissioners could empty the rainy day fund and still come up short.

To cover the shortfall using only property tax revenue would cost residents an additional 15 cents per $100 of assessed value from the current tax rate of 77 cents. From there the rate increase moved to an eight-cent increase before settling on the 6.5 cents accompanied by the income tax hike.

These rate increases are not revenue neutral, and are expected to create almost $1.5 million in surplus funds. These funds, according to County Administrator Harold Higgins, will go to replenishing the budget stabilization fund.

That surplus has not gone unnoticed by teacher advocates.

“I find it interesting the board is taxing people more than necessary to increase budget stabilization,” while not including funding for salary increases, Gary McCabe, of the Maryland State Education Association, said.

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