Behind the Property Tax Increase in Chestertown

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In the June 7, 2018 edition of the Kent County News, there were two front page articles: “Chestertown votes 4-1 to increase property taxes” and “Commissioners hold hearing on FY19 budget”. Both have a direct relationship to taxes; more specifically, your property taxes. Whether you feel good or bad about taxes, they are necessary to fund services. The largest revenue source for Chestertown and Kent County is property tax. Perhaps we should all feel good that the Kent County Commissioners decided to leave the property tax rate at 1.022 cents per $100 of assessed value. For those that live in Chestertown, the feeling may not be so joyous since the property tax rate is increasing from 37 cents to 42 cents per $100 of assessed value.

So why did Chestertown need to increase the property tax rate? There may not be a simple answer, but it does appear related to the lack of a Property Tax Offsets with the County. Residents of Chestertown pay property taxes to the Town and to Kent County for services. The county uses the tax revenues to pay for services that include police, fire, highway and street maintenance, sanitation and waste collection, planning and zoning services, and recreation and parks, as well as staff salaries and other costs of operation.

Property taxes paid to Chestertown and other municipalities cover many similar services yet there is no offset from the county, so town residents are essentially paying the county for services it doesn’t provide to them. Offsets might happen in two ways: Tax Differential which means lowering of the county’s tax rate for Chestertown residents, and/or Tax Rebates that are direct cash or check payments to the government of Chestertown.

There are 23 counties in Maryland. Of these counties, only three offer no Tax Differential or Tax Rebate. Those counties include Kent, Wicomico, and Worchester. Each has its own unfortunate story:

  1. Back in 2012, Kent County had a tax rebate to five municipalities to compensate for parallel solid waste disposal services. The rebate was equivalent to 2 cents per $100 of assessed value. Rebates in Kent County started in 2004. Before that, Kent County provided a Tax Differential. The total tax rebate in 2012 was $193,341 broken out as follows: Betterton-$12,487; Chestertown-$111,622; Galena-$11,202; Millington-$8,553; and Rock Hall-$49,477. It is not known whether the amount of tax rebate covers 100% of the cost of solid waste disposal services but that does not matter. What does matter is that the county recognizes that municipalities pay for duplicate services and should receive some benefit from the county for services they provide at no cost to the county. The lack of recognition by the County Commissioners is a deterrent to small business development, which primarily takes place in the towns.
  2. In January 2018, Ocean City, the largest city in Worchester County, filed suit in Circuit Court against Worchester County due to years of denying a Tax Differential.
  3. The cities of Salisbury and Fruitland and the Town of Delamar make annual requests to Wicomico County for a Tax Differential but are continuously denied.

Chestertown had a Tax Differential/Tax Rebate from 1991 to 2014 with an average of $65,000 per year. The highest amount was in 2011 at $116,147 and the lowest was in 1992 at $32,000. What is disappointing is that the Tax Rebate was denied by the Kent County Commissioners for the past 4 years.

There is a current request to the Kent County Commissioners to reinstate the Tax Rebate for Chestertown. There may be many reasons why the Kent County Commissioners continue to deny Chestertown’s Tax Rebate request. As strange as this might seem, State law allows it. Section 6-305 of the Tax-Property Article of the Annotated Code of Maryland mandates that 9 counties SHALL provide tax differentials or tax rebates when municipalities perform similar county services. Kent County is not one of those 9 counties. Instead, Kent County along with all remaining counties falls under Section 6-306 of the same code. That Section states that the remaining counties MAY establish tax differentials or tax rebates when the municipality performs similar services as the county but is not required to do so.

Beginning in 1991, Chestertown did benefit from a Tax Differential/Tax Rebate, allowing the town’s property tax rate to remain unchanged, but that ended in 2014. If Chestertown had had a Tax Rebate over the past 4 years, perhaps the tax rate increase for Chestertown could have been avoided or reduced. There is a current request to the Kent County Commissioners to reinstate the Tax Rebate for Chestertown, but the county passed its FY 2019 budget without doing so.

This is an election year for the Kent County Commissioners. We now have an opportunity to vote for Commissioners who would help reinstate the Tax Rebate to Chestertown. Everyone benefits from eliminating duplicate tax payments for the same services. An equitable tax burden just might make us all feel a little bit better about the property taxes we pay. Be sure to ask the Kent County Commissioner candidates their opinion. Let the debates begin.

 

Bob Miller, CPA, MST

Cedar Chase Consulting LLC

Chestertown, MD

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Letters to Editor

  1. Marty Stetson says:

    Thank you very much for this story. It has put the town’s dilemma when it comes to cutting services or raising taxes in terms that everyone can understand. You put the problem in a very concise manner as to why the Chestertertown residents have to bear a tax rate increase while the county residents do not. We the residents of Chestertown are helping the rest of the county by providing services for county residents that the incorporated towns provide for their citizens. I am not sure just what 25% or more of the population can do other than elect a County Commissioner who understands the needs of the people. The Commissioners should restore the tax rebate or off set it by what ever means they choose that gives the town residents some relief.
    IT IS THE RIGHT AND FAIR THING TO DO.

  2. Carol Schroeder says:

    With the mention above that the county is responsible for street maintenance, may I ask why the condition of Queen Street between Maple and High is in such horrible condition and has been for years? As far as I have experienced, it is the worst paved street in Chestertown. What is the story on this?

    • Marty Stetson says:

      Ms. Schroeder,

      That is the point of the story, the county does not maintain the roads in town and the town has not had the funds because we get no help form the county to maintain our streets , even through our tax paying money helps maintain county roads.

      Marty Stetson
      4th WardCouncilman

  3. Have to disagree. Chestertown should pay the county for all the rateables that were turned down. Note – Chestertown is the DNA for growth and newratables and upgrading existing properties. However because of the very bad reputation in trying to do business in the town.The only new projects was a Rita water ice building, the Dixon building pays no taxes to C.T. The county gets the the tax credit back from state but not town. Get that camel out of the tent. The historic society wants c.t. To be back to the future. Want more money then decertify the armory so a hotel can be build or ask members of the secret society put their money where they ideas are.

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