Wicomico Revenue Cap’s impact is examined

The county’s 19-year-old Revenue Cap and its possible link to precarious public school rankings was discussed at a forum hosted by the Greater Salisbury Committee and BEACON this week.

Mike Dunn, Greater Salisbury Committee CEO, and Sarah Guy, Associate Director of Business Economic and Community Outreach Network, or BEACON, presented details to about 40 people gathered at the Salisbury Area Chamber of Commerce.

Attendees included top county leaders: County Executive Bob Culver, County Administrative Director Wayne Strausburg, Assistant Director Weston Young, County Council President John Cannon and members of the Wicomico County Board of Education.

Standing beside facts projected on the front wall of the meeting room, Dunn said the cap was a reaction to bad legislation by the County Council in 1999.

“It is hard to imagine any elected local body putting into effect today what the County Council put into place in 1999,” Dunn said.

“We thought there were a lot of people in Wicomico County who didn’t even know we had a revenue cap,” Dunn said.

Two decades ago, the County Council voted to put into effect two significant tax hikes – a .46 percent tax hike or 23 percent increase over the previous year, and a 1 percent increase in the property transfer tax. The cap was approved overwhelmingly by voters.

But, a large percentage of today’s voters were not old enough to understand the cap when it became law, and there has been little discussion about it since it was put into effect, Dunn said.

“The goal here is to generate discussion … we are advocating learning more about the Revenue Cap, it’s limitations and perhaps how we can adjust it,” Dunn said. The cap doesn’t have an emergency contingency, meaning it is exactly as it was in 1999. If nothing is done, it will remain that way for the next 20 years, he said.

“We’ve been handed a life sentence. Was the crime of 1999 worthy of a life sentence? It’s just a simple way of looking at it. We are bringing some options forward, while still having a Revenue Cap, and putting some things in place,” he said.

Guy explained the cap limits the county’s revenue from real property taxes. When real estate values decrease, the property tax rate can increase and when real estate values increase, the property tax rate can decrease, she said.

Effects of the cap include that the county has been unable to collect and use over $15 million from 2006 to 2016. If this continues, the county will continue to lose millions of dollars at a faster rate on a year-to-year basis. Forty-eight percent of the county’s revenue is from local property taxes, she said.

Due to previous tax increase below the cap, current taxes are below prior levels when adjusted for inflation.

“All we were doing was looking at policy and trying to apply some academic hard looks at it and see where the community is. Let’s have a conversation about it,” Dunn said.

Cannon thanked Dunn and Chamber CEO Bill Chambers for planning the meeting and said County Council members respond to the public.

“Maybe we should be looking at a grassroots perspective. Maybe your committee should look at getting a petition out. In all honesty, we’re probably going to be knocking heads for the next two, three, four, five years …  but if it’s in the form of a petition that says, ‘Hey, County Executive. Hey, County Council members, this is what we want,’ maybe that would be better,” he said.

Disagreeing, Dunn said, “It only takes five votes.”

John Palmer, a member of the Board of Education, and one of the founders of Voters Opposing Increased County-City Spending, or VOICE, said the citizens’ group was formed to collect signatures to get a proposed Cap on the ballot in 2000.

He objected to Dunn’s comment that many county residents are unaware of the Cap.

“County residents do know what’s going on with their taxes. Don’t underestimate them. That’s what the County Council thought in 1999. I want to let you know VOICE is still out there. We are still watching,” Palmer said.

He said he voted for a limitation because Talbot County had a tax cap many years ago.  County leaders there raised $22 million in property taxes, but could only accomplish that one time. They went to court and the court decided, “You cannot stop a County Council from raising taxes for services. In the one year it was discontinued, Talbot County taxes went up over 100 percent. That’s what happened when they took it off,” Palmer said.

The purpose of the Chamber is to bring businesses to Wicomico County, Palmer said, adding he isn’t seeing many new businesses.

“Unfunded mandates are killing us. Why aren’t you getting rid of some of these?” he asked, calling for the Chamber to go to Annapolis and fight to see them discontinued.

“What you are proposing here is nothing new. It’s all in history. Go back and research your history,” Palmer said.

Guy argued that prior to studying the Revenue Cap, she was not well informed and did not have a thorough understanding.

“It’s a complicated issue. It’s not one that has been talked about extensively in this format … it’s a valuable conversation to continue having,” she said.

Dunn told Palmer while he understood his position, “we are simply trying to prevent the Revenue Cap in 2018.”

“We think we have identified some challenges. This is the first substantial study of the revenue cap in at least a decade and we think it’s worth pursuing,” Dunn said.

Strausburg said while the discussion is interesting, it is through the prism of government spending.

“I think that, to go back to John Palmer’s point, you also have to look at it through the prism of the taxpayers and what’s affordable for the taxpayers. It has to be affordable to the people who pay the bill. I think a study like this is warranted through that prism because we are, in terms of wealth, our wealth base is one of the lowest in the state. I don’t know if we’re 22nd or 23rd now … we can say ‘Let’s raise taxes,’ but our citizens have to be able to afford those taxes,” Strausburg said.

Culver said the county is “going along as we can.”

“We are not trying to strap anybody. We are taking our resources and using them the best way we know how. Our Board of Education? I want nothing but the best for our students. We very much want to bring our schools up. But for some reason in the years before we were here, they were neglected,” Culver said.

Suggestions in the study include:

  • Changing the language of the cap to be able to take the higher of consumer price index for all urban consumers, or CPI-U, at 2 percent each year.
  • Using a different inflation index.
  • Implementing a safety valve to allow flexibility to cap limits in case of drastic economic changes. This would require a majority vote either by the public or pre-determined board.
  • Using homestead exemptions or circuit breaker programs such as benefits to taxpayers, with benefits increasing as incomes decline.
  • Implementing a sunset-reset clause to terminate the cap after an affixed time.
  • Eliminating the revenue cap and implementing a tax rate instead.

The revenue cap study was prepared under a special GSC panel led by Salisbury accountant Bob Moore. A group of nine GSC members, with the assistance of BEACON and Dr. Memo Diriker and a group of SU graduate business students, worked for a year and a half to complete the report.

This week’s presentation was part of the plan by GSC to get the study out in the community.

Chambers, who has publicly critical of the Revenue Cap, had called for renewed public discussion.

“Antiquated decisions on restrictions for local revenue decisions have and will put a squeeze on our county budget and made it harder for Wicomico County to meet the rising costs of mandated government services,” Chambers said.

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