The Chestertown Council is exploring ways to recover the tax differential the town was at one time granted by Kent County. Councilman David Foster raised the issue at the end of the council’s Monday, June 18 meeting.
A tax differential, a payment or a discounted rate designed to compensate the county’s five towns — Chestertown, Rock Hall, Millington, Galena, and Betterton — for services such as police protection and street repair. With the towns providing those services, the counties are saved much of the cost of providing them. In the case of Chestertown, those services amount to some $3 million in the FY 2019 town budget.
Kent County stopped providing a tax differential in 2014 as a result of the 2008 recession, which led to a decline in tax revenues. At one point, the differential took the form of a “grant in aid” payment that amounted to some $116,000 at its peak – an amount that, as Mayor Chris Cerino noted, would allow the town to repave a couple of streets, at the very least. Cerino and Town Manager Bill Ingersoll said they had approached the County Commissioners about a resumption of the tax differential during the county budget deliberations the last couple of years. Ingersoll said the county’s answer was, “You’re on the radar,” but no action was taken to restore the lost payment.
Foster said he had very little idea what tax differential was before being elected to the council last year. “I was embarrassed; I had property in town for over 20 years, and I had never, ever heard of it.” At the annual Maryland Municipal League (ML) meeting in Ocean City earlier this month, Foster asked representatives of other towns in the state whether they were receiving a tax differential. All the ones he asked said they were receiving either a direct payment or a discounted rate on the county property tax; in most cases, they said the amount had grown by 60 percent over the last few years. In contrast, Foster noted that Chestertown’s tax differential has “decreased by 100 percent.” According to Foster’s research, there are only three counties in the state that don’t provide some form of tax relief to their towns. Foster said he asked the county commissioners why they didn’t provide a differential, “and they kind of mumbled, ‘Oh, we don’t have the money.’ How is it all these other counties can do this?” Foster asked.
The commissioners, during a June 5 public hearing on the county budget, said that flat revenues and rising prices have forced them to make difficult choices, including some reductions of staff and trimming budget requests from many county departments. They did not mention the tax differential.
One commissioner was given the opportunity to address the question at a candidates’ forum for Republican candidates for commissioner, sponsored by the League of Women Voters. Chestertown Councilwoman Linda Kuiper asked the candidates if they supported restoring the differential. Commissioner Billy Short, who is running for reelection, said the commissioners hope to restore the differential within five years. He said he would support it in the form of a reduced tax rate for the town, “giving the money directly back to the taxpayers.” Short said he didn’t understand why Chestertown needs to budget $1.8 million for police work. He went on to say there is considerable duplication of services between the town and county. “Our officers actually operate within Chestertown as well,” with Sheriff’s deputies frequently patrolling the streets, he said. The county also performs some road work within town, he said.
Recapitulating the exchange at the council meeting, Kuiper said that Short had cited the cost of the county’s high-speed internet project as a benefit the town was receiving. “I’m not seeing the advantages of it yet,” she said. She also noted that the Chestertown police department responds to calls for service beyond town limits, benefitting the county. “It didn’t take me very long to decide which commissioner candidate I was going to vote for,” she said.
The county’s property tax rate remains unchanged at $1.022 per $100 assessed value, and the income tax rate is also unchanged. Chestertown raised its property tax rates, which are in addition to the county taxes, by five cents to $0.42 per $100 assessed value.
Foster said he had spoken to Ryan Spiegel, the president-elect of MML about the problem, and was encouraged to write a request for the organization to consider it as an issue it would lobby for in Annapolis. He said the request might gain more attention with the General Assembly because Ocean City is suing Worcester County over the issue. If there were no objections, Foster said he would like to submit a letter requesting that the MML support a requirement that all counties provide a tax differential. He noted that the state code differentiates between counties that “may” provide such a differential and those that “shall,” with Kent falling into the former category. Nine of the state’s counties–primarily the larger, more urban counties–are required to grant some form of tax differential to the incorporated towns as those residents who are in practically all cases already paying taxes for services which the county therefore does not need to provide. Foster said that one of the questions he wanted to ask MML was how the town might go about changing the county’s status from “may” to “shall.”
Cerino asked if such a change would require the local delegates to the General Assembly to support the measure. “It would certainly help,” said Foster. “I think it’s an uphill battle.”
“I totally agree with you; it’s crazy we don’t get anything,” Cerino said. He noted that Chestertown has one-quarter of the county’s population. “For those of you who live in Chestertown, you’re paying full property tax rates to the county, and you’re basically getting no services in return,” he said. “Technically, you’re getting police protection, but 99 out of 100 calls for service are answered by our police.” He listed other services not being supplied by the county to town residents, including snow removal, trash collection, and recycling–services which are provided to residents who live outside the town limits. “What we’re getting is, we’re underwriting services for everyone else in the county. And that’s why (the county commissioners) don’t want to give us a rebate. They have a great deal, they know it, and they have no impetus to change it.”
Foster noted that the majority of the county’s small businesses are located in the towns, and therefore are subject to the higher property tax rates, whether directly or through higher rent payments. That makes the issue one of economic development as well as of fairness, he said. “It’s worth a shot” to try to push for legislative action, he said. He also noted that the makeup of the county commission may change after the November election.
Foster said he would be happy to draft the letter to MML. “It’s not just for Kent County,” he noted. “There’s already 13 counties that fall under this ‘may provide.’ So we’re not alone in this.”
Councilman Marty Stetson suggested that Foster write the letter and the rest of the council add their signatures. Cerino said he would be glad to sign it, but he said it would be important to get more town residents to support the issue. He noted that most are unaware that there is any problem.
Councilman Ellsworth Tolliver asked if it would be worthwhile to mount a public relations campaign to inform residents of the issue. Foster said he hoped the media were listening and that they would report on the council discussion. The other thing the town can try to do is get groups like the League of Women Voters to add it to the list of questions they ask candidates for office, he said.
Councilman Marty Stetson said that council members who get complaints about their votes to increase town taxes can reply that the increase wouldn’t have been necessary if the county were still providing the tax differential.
Ingersoll said he had made that point during budget discussions. “A simple way to understand it is ‘double taxation,’” he said. He said the commissioner’s saying a restoration of the tax differential was “on their radar” was hard to understand in an election year. “On whose radar? Are you going to be in or out?” he asked to wrap up the discussion as the council moved on to other issues.
Look for continuing coverage of this issue as it evolves. As available, the Spy will post copies of the letters on the tax differential from the town of Chestertown to Kent County and to the Maryland Municipal League or other relevant documents.
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William Pickrum says
The property tax collected by the county is taxpayer money. This money for duplicate services should be returned directly to the taxpayer.
Marty Stetson says
Well do it Commissioner Pickrum. If you do I will make a motion to reduce our town taxes by what ever you see to reduce the rate to the town tax payers. If you had did it this year we would have not had to raise out taxes. Make us a promise you will do it next year.