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| FOR THE RECORD | |
Reduction in Cap on Increases
by Richard E. Israel My name is Richard Israel. I live at 61 Shaw Street. For the last twenty-nine years I have been a homeowner in Annapolis (first on Dean Street and then on Shaw Street). I favor reducing the cap on increases in residential property assessments. However, it would be premature to enact the proposed ordinance, (O-20-05) which sets the cap at 4%, at this time. Enactment should be delayed until the fiscal impact can be assessed, especially the effect on the City’s bond rating. Moreover, the deadline for the City to lower the cap is not until November 25. State law limits annual increases in the assessment of residential property to 10%. However, local governments can reduce this cap. Anne Arundel County has reduced the cap to 2%. The limit on increases in assessment is accomplished through a tax credit, which is generally referred to as the Homestead Tax Credit.1 Reasons for a reduction in the cap: Property taxes do not take account of the ability to pay. Homeowners who bought their houses decades ago and who are living on fixed incomes find property taxes to be an increasing burden. Moreover, the Homeowners Tax Credit (Circuit Breaker)2 and the Deferred Payment Program3, which the City has implemented4, provide only limited relief due to income, age and other requirements. Reducing the cap will not take money from the City. Rising assessments mean that the City can lower the tax rate and still receive more money. Limiting increases in assessments will merely limit the size of the windfall of additional money. Reducing the cap is not unfair to commercial property. All real property is assessed at full market value. However, market value for residential property is determined by cost or comparable sales. Market value for commercial property is based on income-producing potential. Reduction of the cap to 4% at this time would be premature. This is year that residential property is being reassessed. The results will be known toward the end of the year, as the date of finality is January 1, 2006. Once the assessable base is determined, the effect of a reduction can be better assessed. Bond-rating houses can then advise City of effect of reduction on bond rating which is now AA+. The deadline under State law for advising State of reduction is not until November 25th. Conclusion: I favor enactment of an ordinance reducing cap on increases in residential assessments. However, enacting this ordinance with a specific figure would be premature. 1 See Md. Code, Tax Property, Sec. 9-105. ::TOP:: |
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