Gaithersburg Tax Cut

Last Thursday, I attended the Montgomery County Senate delegation meeting which was taken up by a piece of local legislation advocated by Sen. Jennie Forehand (D-17) and the City of Gaithersburg. The legislation is geared toward correcting a tax anomaly created by Gaithersburg's expansion and poorly crafted legislation.

The Maryland-National Capital Park and Planning Commission (M-NCPPC) is funded by a local tax. Several municipalities in northern Montgomery, including Rockville and Gaithersburg, do not pay the tax on the grounds that they fund their own parks. However, the areas annexed by the municipalities since the creation of the M-NCPPC since its creation some 41 years ago are in limbo. They haven't been charged the tax but are legally required to pay it because they live outside the boundaries of Gaithersburg at the time the law went into effect.

This problem affects some 19,000 homes in Gaithersburg and only around 30 in Rockville, though the number in Rockville is projected to rise substantially based on construction unless the problem is fixed. The proposed local legislation would change the law governing the tax used to fund the M-NCPPC so that the areas annexed by the municipalities don't have to pay it. and the County can't go after the residents for retroactive taxes.

M-NCPPC argues that several park facilities are really county facilities and the municipalities should pay a large portion of the tax. Mayor Sidney Katz, assisted by staff from the City, strenuously argued that Gaithersburg residents should have to pay no more than 10 percent of the tax as Gaithersburg funds it own parks and there is a provision for reciprocal park use among Gaithersburg and Montgomery residents.

Several senators raised the issue of inequity among county residents if Gaithersburg residents are totally exempt from the tax. Sen. Jamie Raskin (D-20) pointed out that Takoma Park residents pay the tax even though they also fund their own park facilities. Sen. P.J. Hogan (D-39) noted that he pays homeowner association fees to fund facilities in his Upcounty neighborhood on top of the M-NCPPC tax. M-NCPPC representatives argued that several facilities in the County are unique and used by people from all over the County.

Gaithersburg countered that exempting all of Gaithersburg from the tax would simply make de jure the de facto situation before it was discovered that many homes in Gaithersburg are liable for the tax. Gaithersberg reps agreed that the County needed to negotiate with all municipalities about the share of the tax that their residents would pay in order to achieve equity across the County. However, the M-NCPPC and Gaithersburg are far apart in what they consider an equitable tax rate for the City of Gaithersburg.

After a long discussion, the bill gained the support of the Montgomery County senators.

In truth, this bill is utterly unnecessary. County Executive Leggett backed the bill but also made clear that he had no intention of collecting this tax. Gaithersburg even successfully fought off a proposal to place a time limit of two years on the exemption of all Gaithersburg residents, arguing that this provision would discourage the County from negotiating in good faith with Gaithersburg and other municipalities.

Hogwash. The County Executive and County Council would have to be politically brain dead to even consider angering such a large block of residents unnecessarily. They would certainly want negotiations brought to a conclusion acceptable to the County and the City. In contrast, Gaithersburg's pursuit of a permanent exemption from the M-NCPPC tax gives the City absolutely no incentive to negotiate in good faith because they already don't pay any tax but can use all of the County facilities.

The reciprocity norm will likely see this bill through to final passage. Undoubtedly, Montgomery senators do not want to annoy Sen. Forehand, not just because she has a reputation of being extremely nice but because they may need her support on a bill affecting their own districts some day. House of Delegates Majority Leader Kumar Barve personally lobbied the Senate delegation to support the bill. It's hard to turn him down too.

Unfortunately, as I believe Sen. Rich Madaleno pointed out, this means that the County delegation will likely have to revisit this issue in order to achieve greater equity. The next time the issue appear, the delegation may not have the luxury of simply ratifying an agreement between municipalities and the County as this proposal appears to make such an agreement much less likely. And state legislators would be unwise to simply let the issue rest as it allows a major inequity between municipalities to continue.