The Kent Commissioners on Tuesday heard from the county’s five municipalities on the need for a tax differential–and the response was mixed.
The differential is a rebate on property taxes town residents pay the county for services like police, street cleaning and planning & zoning, which the town provides and pays for out of its own budget. The differential exists in the vast majority of counties in the form of a lower county tax rate to town residents or a direct cash payout to the municipality, but not in all cases.
Kent is one of only three counties in Maryland that does not provide a differential to its municipalities.
Chestertown Mayor Chris Cerino and the Town Council have maintained that withholding a differential to Chestertown amounts to double taxation because the county does not provide these services within town limits–yet town residents are taxed at both the municipal and county levels.
“We provide three major services that you otherwise provide to every member of the county accept in a few of these incorporated towns,” Cerino said at a commissioner’s work session with the county’s mayors on Tuesday, Feb. 11.
An ongoing argument between Chestertown and the county is a grant-in-aid for waste disposal that the county discontinued in fiscal 2015.
Since then, Cerino has gone to the commissioners unsuccessfully each year to have the grant-in-aid reinstated. This year he requested a $250,000 rebate for fiscal 2021 to help recover some of the cost of services.
Cerino said the town bears the expense of police, street maintenance and planning & zoning at a cost of just over $3 million annually–and that the town’s request for $250,000 is a bargain for the county. He pointed out that the town sends $8.6 million in property and income tax revenue to the county annually, according to data the town obtained from the Maryland Comptroller’s Office.
“The $250,000 I’m requesting as a proportion of the [county’s] $50 million budget is one-half of one percent of the total budget,” he said. He said it would represent the smallest rebate to any municipality in Maryland.
Cerino lamented that the lack of a differential was an economic handicap for Chestertown because it discouraged investment in Opportunity Zones and Enterprise Zones.
“It’s becoming the place with by far the highest tax rate,” Cerino said. “If you want to draw in new businesses…it’s in your best interest to give us a little kickback so we can keep policing ourselves. It saves you money and allows us to keep our tax rates low.”
But the Kent Commissioners have maintained that they provide support for services that benefit Chestertown in a manner that equals or exceeds an annual payment of a differential. The commissioners also maintain that these services are above and beyond what other counties provide their municipalities.
Millington Councilman Kevin Hemstock said determining a differential for the incorporate areas was easy because “that wheel has already been invented.”
He referenced a news article from 1989 that reaffirmed the county’s commitment to continue a five-cent tax differential to the municipalities in a year when property taxes were increased 33 cents to close a $1 million deficit.
“It was equitable and it adjusted itself for inflation in various tax assessments,” he said. “We don’t have to come up with an exact amount, somewhere along the line the county did that already.”
Betterton Town Mayor Don Sutton said he was not seeking a differential and said a review at the town’s finances indicated no significant inequities that would require one.
“We’re OK this year,” he said.
Rock Hall Mayor Dawn Jacobs expressed no real need for a differential either and said there was a strong relationship with the Kent County Sheriff’s Office to support the town’s three police officers. She said the county was also providing needed support with emergency services and equipment.
Galena Mayor John Carroll said they looked for duplication of services and found that the lack of a differential wasn’t “burdensome” to the town. He said any future rebate that could be justified should translate into a tax rebate directly to the citizens and not a cash payout to the town.
“[A rebate] going back into the coffers of the town isn’t always better than going back to the taxpayers,” he said.
Commissioner Tom Mason asked Cerino if Chestertown would raise taxes if the county provided a differential directly to the citizens.
Cerino responded that the town would in fact recoup the differential by raising taxes on residents, but the additional revenue would help the town increase services.
“If you did give us a 5-cent differential on the county tax rate that potentially allows us to raise our taxes by an equivalent amount and it would be a wash for the taxpayers,” Cerino said. “It would help the taxpayers because it would allow us to stay solvent and keep our own police force…and get back on track paving streets.”
Letters to Editor
David Foster says
This is a very good report but one that fails to address the basic reasons why the mayors of Kent County’s five municipalities expressed somewhat different opinions on the need for a Tax Differential. As defined by the University of Maryland’s Institute for Governmental Service, “Tax Differentials are reductions in municipal property owners’ county property tax rates to compensate for services that their municipality provides in lieu of county services.” For example, when Chestertown maintains its own 21 miles of town roads instead of the county government, it saves Kent County money but incurs considerable costs on its own. Likewise, when Chestertown funds its own 12 man police force, this again saves Kent County money by allowing it to concentrate the sheriff’s resources in the more rural areas of the county as well as in the smaller towns. Furthermore, even in the absence of a Tax Differential, many smaller towns in our county benefit from county parks, beaches, and other facilities and services not provided to Chestertown.
We look forward to continued serious discussions leading to the adoption of Tax Differentials wherever it can be demonstrated that any municipality is actually saving the county money and being unfairly charged for services not provided. In this way, we hope to make our towns more attractive and more competitive in comparison to other investment areas in our region and thus expand the sustainable tax base for all of Kent County.
It is time to recognize that we all call Kent County home and that to arbitrarily penalize the 40% or our county’s residents who live in municipalities will ultimately handicap us all.
Gren Whitman says
Spy reporter Dan Menefee sums up the tax differential/tax rebate situation in a nutshell: Property owners in Chestertown and Rock Hall—and Millington and Galena to a lesser extent—“are taxed at both the municipal and county levels.”
For example, in Rock Hall, these duplicate services include public safety (the RHPD at $236,855) and planning and zoning (an annual $37,500 contract). And because they are taxed by both town and county for public safety and planning and zoning services, Rock Hall taxpayers are required to pay an extra $274,355.
When town and county property taxes pay for duplicate services, a tax differential or tax rebate eliminates this unfair and unjustifiable double billing of a town’s taxpayers It is high time for the county commissioners to end this inequity by offering a tax rebate to the five municipalities as appropriate or a reduction in municipal tax rates.