Framing Frederick’s Future – Fiscal Choices
In the first three installments of this series, we examined the history of residential growth in Frederick over the last 50+ years, defined the residential “pipeline,” and evaluated the county’s Adequate Public Facilities Ordinance (“APFO”) in light of demographic changes. In the context of this background, we turn to government fiscal policy decisions.
To our detriment, government has often looked at decisions in a four year time frame, when we needed them to think from “four to 40.” No, that’s not run a 4.0 second 40 yard dash, which is desired in an NFL prospect. It is making a decision within a four year elected term, while considering whether the decision will have a positive or negative effect on the next 40 years.
The previous articles touched on some of those policy decisions made by the local legislative body. Many assume this body makes all of the decisions that affect growth and development at the local level. This is not so; for example, both the State Department of Education and local Board of Education affect growth and development in the county through such programmatic changes as mandated pre-kindergarten (“pre-K”), and reductions in class size that affect the State Rated Capacity, and through pragmatic changes such as the decision to re-district (or not re-district).
Government entities can affect the number of students in the schools with such decisions, even before the next new house comes out of the ground.
There are fiscal choices as well. Government, at all levels, receives the majority of its income through income and property taxes, and it chooses to expend that revenue on a variety of programs and services, including service at levels that are arguably beyond the scope of basic health, safety and welfare.
Again, it is not just our local legislative body that makes all of the fiscal decisions. We contribute to services, through our state and federal taxes. Yet, are we certain we are getting our share of the return?
Approximately 35% of Frederick County government’s revenue for the county operating budget will come from income taxes; approximately 52% will come from property tax.
Thus, with major revenue line items in the operating budget being property tax, income tax and recordation tax (collected at the courthouse when certain real estate transaction documents are recorded in the Land Records), how does Frederick County increase revenue? It can increase these items on existing residents – the county government could charge you more on your property tax bill, up your “piggy-back” income tax, or take more money from you when you record your next deed or deed of trust.
Alternatively, the county could look for additional payers of these taxes. Where do those payers come from? These payers are the people who come from elsewhere, and move in to newly constructed homes in Frederick County.
The question naturally turns to whether new residential growth pays for itself. In 2000, an Economic Impact Analysis of Real Estate in Frederick County was performed by Legg Mason, and it showed a positive direct and indirect economic impact of the real estate construction industry.
In 2004, Anirban Basu, a noted regional economist, performed a Fiscal Impact Analysis of New Homebuilding in Central Maryland and found new homes pay for themselves in each jurisdiction studied, under each scenario.
In 2010, a National Association of Home Builders report entitled ‘Metro Area Impact of Homebuilding’ found in Frederick County that an average single-family home priced at $410,448 would result in one-year impact of $32,208 in revenue and generate three local jobs and on average generate $10,689 in recurring taxes and other revenue for local governments.
A number of other development impact studies have been performed for individual developments in Frederick County and its municipalities, and all indicated positive economic impacts.
Fiscal and economic experts have prepared and reviewed all of the data discussed above; time and again, the numbers are shown to be true. Residential growth does pay for itself.
If the county is to add more sheriff’s deputies to the payroll, or increase funding to the Board of Education, where does the money come from? County government can increase the tax burden on existing county residents.
Or, with a fragile economy, level-to-declining school enrollments with schools at 88% capacity system-wide, and building permit issuances that will not keep up with population projections, county government can choose to facilitate an expanding tax base by facilitating new residents.
The choices of our county government are ultimately our choices. What will you choose?