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Tax hike level still unknown

(April 10, 2015) With a gulf of $22 million between revenues and requested expenditures, and a law requiring the publication of a “good faith estimate” of the tax rate in advance of the May 5 budget hearing, the Worcester County Commissioners decided on Tuesday to wait until next week to reveal what that number might be.

Public hearings are required whenever the tax rate exceeds the constant yield rate, the number determined by the state to produce funding levels consistent with last year’s revenue. This year’s constant yield rate for Worcester is 77.55 cents per $100 of assessed value, up about one-half penny over last year.

While Worcester County could charge up to that amount without much fanfare, the problem is that might not be nearly enough. Not only is the county beset by shrinking property values and anemic gains in assessments, it also has a backlog of projects that were delayed because of the last decade’s deep recession.

The commissioners were well aware a shortfall was coming, but the size and shape of it remained elusive to the public until a few weeks ago.

County Treasurer Phil Thompson delivered a shock: The county could use 100 percent of the rainy day fund socked away by previous commissioners and still face a shortfall in the coming budget year. More than that, with the exhaustion of the safety net, fiscal 2017 was looking even more dire than 2016.

Part of the problem is in the assessments themselves. Ocean City counts for about 60 percent of all property value in the county, and properties are reassessed in three-year cycles. Ocean City was reassessed for this year, and won’t be reevaluated until 2019. Thompson, the commissioners — everyone expected this year to be the turnaround.

But it didn’t happen.

“The County Commissioners have indicated their desire to adopt a budget equal to or less than the total FY15 budget of $177,981,133,” County Administrator Harold Higgins wrote in a report to the board.

But to maintain a 2016 budget at 2015 spending levels, county officials said, the tax rate would have to be increased by 6.7 cents per $100 of assessed value, taking it up to 83.7 cents per $100, would be necessary. To fund the requested budget completely would require a tax increase of 14.4 cents, according to the county’s calculations.

Neither estimate takes into account budget stabilization funds by design. The county can’t use savings in the formulation of these numbers to present to the public.

“This is the first time in four years we’ve advertised a tax increase,” Board President M. Jim Bunting said Tuesday, “I don’t feel the public should feel we’ve already got our minds made up.”

A nuance of the law requires that hearings be held for every increase over the constant yield rate, so if the published number comes in low, a new round of hearings will be held. If the commissioners publish an advertisement for a 7-cent hike, for example, but the real number turns out to be closer to 8 cents, a new round of hearings will be scheduled. So there is a real danger of lowballing the amount.

Commissioner Joe Mitrecic said he was concerned about a chilling effect the published numbers could produce.

“Everyone will know we’ve got to cut 8 cents from somewhere,” he said, referring to the gap between 6.7 cents and 14.4 cents. Several county departments, such as Tourism and Liquor Control, have not yet had their budget requests heard by the commissioners.

To that end Mitrecic moved to delay until next Tuesday’s budget work session, the decision to define what the county’s good faith estimate will be.

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