Council Passes ‘Positive Impact’ Emergency Ordinance; Lower Credit Percentage Will Reduce Tax Bills

OCEAN CITY – An emergency ordinance was passed this week to bring tax relief to owner-occupied homes in Ocean City by lowering the Homestead Tax Credit to 100 percent, ultimately reducing tax bills by about $80,000.

The ordinance amends the Local Homestead Tax Credit Percentage for Ocean City to 100 percent in accordance with the Town of Ocean City Strategic Plan.

Last week Finance Administrator Martha Bennett recognized the third goal of the strategic plan is “More Livable Community for Residents” with objectives to create more reasons for people and employees to make the choice to live in Ocean City and to increase the number of year-round residents.

According to Bennett, the Tax Property Article of the Annotated Code of Maryland allows municipal corporations to set a Homestead Tax Credit percentage by Nov. 25 of each year to be no greater than 110 percent and no less than 100 percent.

Bennett explained setting a credit percentage of 100 percent would support the objectives of the plan. A change in the property tax credit for owner-occupied homes to 100 percent would mean the taxable assessment would not increase each year unless there is a change in use or the property is sold.

Prior to the amendment, Ocean City’s Homestead Tax Rate was set to 103 percent by default of being set the same as Worcester County.

The potential impact to owner-occupied home owners of reducing the homestead tax credit to 100 percent, or a 0-percent increase in their assessment each year, at the FY15 tax rate of .4704 cents per $100 assessed valuation, the reduction in their tax bills would be approximately $80,000.

Former Councilman Vince Gisriel came before the Mayor and City Council this week in support of the ordinance.

“It has very minimal impact on the property tax. It [Homestead Tax Credit] has been on Maryland’s books for many years, and many towns, cities and counties have exercised the option to lower it from the limit of 110 percent,” Gisriel said. “When I was on the council, I suggested lowering it from 110 percent to 105 percent and down. I was intrigued by the fact that then it only had about an $85,000 impact on the property tax, and we had about 2,200 to 2,400 properties, and when I heard about this discussion I was intrigued that is about the same impact it is today.”

Gisriel presented statistics reported by the State of Maryland Office of Assessments and Taxation regarding the Homestead Tax Credit, starting with 21 out of 24 Maryland political subsidies have a Homestead Tax Rate between 100 and 108 percent; one jurisdiction is set at 110 percent; two are set at 102 percent; one at 103 percent, which is Worcester County; two more are set at 104 percent; and 12 are set at 105 percent. Gisriel recognized the majority opted to set the rate at 105 percent or lower.

Gisriel also pointed out Mt. Airy, Fredrick and Carroll counties, Upper Marlboro and Salisbury have set their rate at 100 percent.

“I hope this measure is passed tonight because I really believe that local residents need a break. The reason I bring up all the statistics is absentee- owners that live in these other 29 towns plus are already getting a break in their local jurisdiction,” he said. “Also, the fact that we need to control the tax levy against our citizens.”

Gisriel acknowledged the current petition effort being led by Ocean City Taxpayers for Social Justice attempting to lower the tax rate to the 2009 rate of .3800 per $100 of assessed valuation.

“Having worked on a lot of petitions over the years, I know that it is a hot button item. I am not working on this particular petition for a couple reasons, but I know that people being approached are concerned,” Gisriel said. “There is a lot of people out there hurting, and the key to this success is not only to lower it to zero but to hold the tax rate to constant yield or lower because if you lower the assessment tax but continue to increase the tax rate it is a moot point.”

Councilman Dennis Dare agreed the ordinance would be beneficial to residents as well as its effect of economic stimulus.

“It will encourage people to live in Ocean City and spend their tax savings in our businesses hopefully,” Dare said. “We have had a lot of residents over the years move over the [state] line for tax purposes but you really get what you pay for. In Ocean City, you get a police officer [in response] in the matter of minutes. We need to encourage people to stay in Ocean City, not just from a service standpoint but from an affordability standpoint. This ordinance is far reaching and I think will have a positive impact on our citizens.”

The City Council voted unanimously to approve the emergency ordinance, and Mayor Rick Meehan agreed to sign the ordinance to be submitted to the state by the Nov. 25 deadline.

“I do approve it being an emergency ordinance forward. It is a positive move from council. When you look at the objective as it has been stated in our strategic plan to make Ocean City a more livable, viable community for residents, with objectives to make more reasons for people and employees to make the choice to live in Ocean City and increase the number of year-round residents,” Meehan said.

According to the State of Maryland Department of Assessments and Taxation, to help homeowners deal with large assessment increases on their principal residence, state law established the Homestead Property Tax Credit, which limits the increase in taxable assessments each year to a fixed percentage. Every county and municipality in Maryland is required to limit taxable assessment increases to 10 percent or less each year.

Technically, the Homestead Credit does not limit the market value of the property as determined by the Department of Assessments and Taxation. Instead, it is actually a credit calculated on any assessment increase exceeding 10 percent, or the lower cap enacted by the local governments, from one year to the next. The credit is calculated based on the 10 percent limit for purposes of the state property tax, and 10 percent or less as determined by local governments for purposes of local taxation. In other words, the homeowner pays no property tax on the market value increase which is above the limit.