MFPITEM 6
May 6, 2010
Worksession
MEMORANDUM
TO:
FROM:
Management and Fiscal Policy Committee
~
Michael Faden, Senior Legislative Attorney
eo
Glenn arlin, Deputy Staff Director
Worksession: Expedited Bill 14-10, Recordation Tax - Allocation of Revenue
SUBJECT:
Expedited Bill 14-10, Recordation Tax - Allocation of Revenue, sponsored by the Council
President at the request of the County Executive, was introduced on March 23, 2010. A public hearing
was held on May 4 (see testimony, ©15-17).
Recordation tax background As Councilmembers will recall, the County recordation tax,
levied under state law and shown in County Code §52-16B, since 2008 has 3 levels or tiers which
detennine how the revenue from this tax is allocated:
Tier
I
2
3
Rate
$4.40/$1000
$2.50/$1000
$3.10/$1000 (>$500,000)
Use of funds
General Fund (unrestricted)
MCPS capital, College educational technology
50% County government capital improvements
50% new funding for rental assistance programs
Summary Bill 14-10 would suspend for the next 2 fiscal years the current requirement that
certain revenue from the recordation tax (Tier 3) be allocated to the cost of County Government capital
projects and rental assistance programs for low and moderate income households.
On April 27, the Executive proposed a further amendment (see ©7-8) that would also suspend,
for the next 3 fiscal years, the requirement that another portion of the recordation tax (Tier 2) be allocated
to capital improvements to County schools and educational technology for Montgomery College.
Fiscal impact Total reallocations of $13.22 million. See fiscal impact statement on ©9-10 and
OMB Director's testimony on ©15-16. Economic impact: none assumed (effect of lowering rental
assistance funding not discussed).
Options Other options before the Council for allocation of recordation tax revenue include:
• suspend the statutory revenue allocations in Tiers 2-3 only for the next fiscal year, FYl1 (this
was Montgomery College's recommendation see ©11-14);
• repeal the statutory revenue allocations in Tiers 2-3 so that all recordation tax revenue goes to
the General Fund and is available for any appropriation.
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At the hearing Council member Knapp asked, if this revenue is reallocated as the Executive
proposed, what amount would be moved from current revenue funding to bond funds. OMB Director
Beach said he would have that number for the Committee.
This packet contains:
Expedited Bill 14-10
Legislative Request Report
Memo from County Executive
Amendment memo from County Executive
Executive amendment
Fiscal Impact Statement
Memo from Montgomery College
Executive testimony
GCAAR testimony
F:\LAw\BlLLS\1014 Recordation Tax\MFP Memo.Doc
Circle
#
1
3
4
7
8
9
11
15
17
2
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Expedited Bill No.
14-10
Concerning: Recordation Tax­
Allocation of Revenue
Revised: 3-22-10
Draft No. _1_
Introduced:
March 23, 2010
Expires:
September 23,2011
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _--::-::--_ _ _ _---"_ _
Sunset Date:
-!..!N~on:..!.::e~
_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
AN EXPEDITED ACT
to:
(1)
revise the allocation of certain revenue received from the recordation
tax;
and
(2)
generally amend County law related to the recordation tax.
By amending
Laws of Montgomery County 2009
Chapter 17
Boldface
Underlining
[Single boldface brackets]
QQuble underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law
by
original hill.
Deletedfrom existing law
by
original
bill.
Added
by
amendment.
Deletedfrom existing law or the
bill by
amendment.
Existing law unaffected
by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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ExPEDITED
BILL No. 14-10
1
Sec.
1.
Chapter 17 of the Laws of Montgomery County 2009 is amended
as follows:
2
3
4
*
*
*
Sec. 3. Allocation of Revenue. During any fiscal year that begins on or after
July 1, [2010] 2012, the net revenue attributable to the increase in the rate of the
recordation tax enacted in this Act must be reserved for and allocated equally to:
(a)
(b)
the cost of County government capital improvements; and
rental assistance programs for low- and moderate-income households,
which must not be used to supplant any otherwise available funds.
Sec. 2. Expedited Effective Date.
The Council declares that this legislation
IS
5
6
7
8
9
10
11
12
necessary for the immediate
protection of the public interest. This Act takes effect on the date when
it
becomes
law.
Approved:
13
14
15
16
17
18
Nancy Floreen, President, County Council
Approved:
Date
19
20
21
Isiah Leggett, County Executive
This is a correct copy ofCouncil action.
Date
22
23
24
25
Linda M. Lauer, Clerk of the Council
Date
F:\LAVV'lBILLS\1014 Recordation Tax\BiII1.DOC
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LEGISLA TIVE REQUEST REPORT
Expedited
Bill
14-10
Recordation Tax - Allocation of Revenue
DESCRIPTION:
This Bill would suspend the current requirement that portions of the
recordation tax be allocated to: (a) the cost of County Government capital
projects; and (b) rental assistance programs for low and moderate income
households.
In order to meet current fiscal challenges facing the County, the County
must increase the amount of revenue available to maintain core
Government programs and services.
To enhance the amount of revenue available to support core government
programs and services.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
Office of Management and Budget; Department of Finance
FISCAL IMPACT:
To be requested.
ECONOMIC
IMPACT:
EVALUATION:
To be requested.
Subject to the general oversight of the County Executive and the County
Council.
EXPERIENCE
ELSEWHERE:
SOURCES OF
INFORMATION:
Joseph Beach, Director of Management and Budget
Kathleen Boucher, Assistant Chief Administrative Officer
Marc Hansen, Acting County Attorney
APPLICATION
Revenue laws apply County-wide.
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A.
F:\LAW\BILLS\I 0 14 Recordation Tax\LRR.DOC
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE. MARYLAND 20850
lsiah
.~~"''''~
..
County Executive
MEMORANDUM
March 18,2010
TO:
FROM:
SUBJECT:
Nancy Floreen, Council President
Isiah Leggett, County
Executive~tJ3~t-,0~-­
)
0'
(
:~
FY 2011 Budget Reconciliation and Financing Act
I am attaching for Council's consideration a Budget Reconciliation and Financing
Act (BRFA) which makes changes to the County Code that are necessary to reconcile my
recommended FY 2011 operating budget with projected FY 2011 revenues. This bill will help
the County address its current fiscal challenges by increasing the amount of revenue available to
maintain and enhance core government programs and services. I am also attaching a Legislative
Request Report for the bill. A Fiscal Impact Statement will be transmitted to Council soon.
The BRFA consists of five primary components. First, it increases the energy tax
rates. Second, it temporarily redirects the portion of recordation tax revenues that are currently
reserved for County Govemment capital projects and rental assistance programs to the general
fund for general purposes. Third, it allows revenues generated by the Water Quality Protection
Charge to be used to pay debt service on bonds that fund stonnwater management infi:astructure
projects. Fourth, it transfers responsibility for administering equal employment opportunity
programs from the Office of Human Resources to the Office of Human Rights. Fifth, it
authorizes the Fire and Rescue Service to impose an Emergency Medical Services (EMS)
Transport Fee.
As the Council knows, the County's energy tax is actuaUy a tax on fuel oil,
natural gas, and electric utility providers which is passed on to all utility customers. Because the
energy tax is a broad-based tax, its impact on families is reduced by the fact that it is paid by
businesses and households, and all levels of govemment, including federal agencies located in
the County (that currently do not pay any other major County tax). Additionally, the energy tax
is a consumption tax based on energy usage.
It
is not based on the overall size of the utility bill
or the cost per unit of energy used as billed to the consumer. Therefore, the amount of the tax
can be lessened by reduced energy usage. Based on existing usage patterns for the average
homeowner, my recommended FY 2011 budget assumes an average increase in the energy tax of
approximately $2.90 per month. I have also recommended additional funding
in
the Health and
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Nancy Floreen, Council President
March 18,2010
Page 2
Human Services budget for the County's Energy Assistance Program to minimize the impact to
low-income households.
My recommended FYII budget contains several efforts to restructure County
Government to improve responsiveness and efficiency. One of these changes is the transfer of
the Equal Employment Opportunity program from the Office of Human Resources to the Office
of Human Rights. This shift takes advantage of existing staff resources to reduce costs and
leverage the efforts of County staff to produce better outcomes for the community. This bill
modifies the County code provisions relating to the responsibilities of the Office of Human
Resources and Office of Human Rights to reflect this change.
The EMS Transport Fee is needed to fund fire and rescue services in the County.
Without this fee, emergency response to residents will be impaired. EMS Transport Fees are
widely employed throughout the nation and by local governments throughout the Washington
region. These jurisdictions have not experienced any indication that people decline to use
emergency transports as a result of the imposition of an ambulance fee. By creating a prepaid
fund for uninsured County residents, the legislation that I am transmitting imp-oses a fee only on
County residents with health insurance which covers EMS Transports. This arrangement more
equitably distributes the economic burden of providing EMS transport services in the County
between residents and nonresidents. The legislation provides for a hardship waiver for
nonresidents who fall below 300 percent of federal poverty guidelines.
To provide the Council with a complete picture of the EMS Transport
program created by this bill, I am attaching a copy of the proposed Executive Regulation to
implement the fee. This proposed regulation will be published in the April 2010 County Register
and submitted to Council after the 30-day public comment period ends on April 30.
Finally, I note that the BRF A is consistent with Bill 31-09, Consideration of
Bills - One Subject (enacted on September 29,2009), which requires that a bill "contain only
one subject matter".' As noted in the Council staff packet for Bill 31-09, that bill was intended to
adopt the "one subject rule" of the Maryland Constitution, which requires all laws enacted by the
General Assembly to contain only one subject. The Maryland Attorney General has repeatedly
concluded that budget reconciliation and financing bills do not conflict with the one subject rule.
For example, in 2005, the Attorney General noted that "[fJor the past fourteen years, 15 budget
reconciliation, budget reconciliation and financing acts or variations thereof, have been used to
balance budgets, raise revenue, make fund transfers, redistribute funds, cut mandated
appropriations and authorize or mandate appropriations.") The Attorney General concluded that
all of those bills were consistent with the one subject rule because the provisions ofthe bills were
"clearly germane to the single subject of financing State and local government".
See Panitz v.
Comptroller a/the Treasury,
247 Md. 501 (1967) (Omnibus supplemental appropriation bill
comprised a single subject for purposes of § 29 of
Art
III ofthe State Constitution even though
See May 19, 2005 memorandum from Attorney General
J.
Joseph Curran, Jr.
to
Governor Robert Ehrlich
""0',,,'11,,,
House Bill 147 (2005).
!
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Nancy Floreen, Council President
March 18,2010
Page 3
the bill combined such diverse elements as police aid to local government; teacher salaries and
pensions; and general unrestricted grants to local government).
Attachments (3)
cc:
Joseph Adler, Director, Office of Human Resources
Jennifer Barrett, Director, Finance Department
Joseph Beach, Director, OMB
Kathleen Boucher, ACAO
Richard Bowers, Fire Chief, MCFRS
Marc Hansen, Acting County Attorney
Robert Hoyt, Director, DEP
Richard Y. Nelson, Jr., Director, DHCA
James Stowe, Director, Office of Human Rights
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OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
ROCKVILLE, MARYLAND 20B50
MEMORANDUM
April 27, 2010
TO:
Nancy Floreen, President
Montgomery County Council
FROM:
Wah
Leggett, County Executive
-P
~
)
.a
SUBJECT:
Proposed Amendment
to
Bi1l14-10,
Recordation Tax-Allocation of Revenue
The County has experienced a steep decline in projected revenues from the income
tax.
This decline combined with the need to restore the County's reserVe ltwels to the 6% policy
level has opened a
FY-11
budget gap of approximately
$200
million.
A
major part of my
recommended strategy for closing this budget gap is to reduce current revenue funding of capital
projects.
In
order to implement this strategy I am reluctantly recommending that Bill
14-10,
Recordation Tax-Allocation ofRevenue, be amended to suspend for two years the current
requirement that a portion of the recordation
tax
be allocated to the cost of capital improvements
to schools and educational technology for Montgomery College. A draft amendment to
Bi1114­
lOis attached to this memorandum.
IL:tjs
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ExPEDITED BILL
No.
[CLICK - TYPE NUMBER]
1
2
3
4
Proposed Amendment to Bill 14-10
5
6
7
Sec. 2. Chapter 9 of the Laws of Montgomery County 2002, Sec 4, as
amended by Chapter 21 of the Laws of Montgomery County 2003, and
further amended by Chapter 33 of the Laws of Montgomery County 2003, is
further amended as follows:
Sec. 4. Allocation of Revenue
During any fiscal year that begins on or after July 1, 2004, the net revenue
attributable to the increase
in
the rate of the recordation tax enacted in this Act must
be reserved for and allocated to the cost of capital improvements to schools and
educational technology for Montgomery College in the form of debt service for debt-
eligible projects and current revenue for debt-eligible or non-debt-eligible projects.
This
~llocation
8
9
10
11
12
13
14
15
16
ends as of the effective date of this Act and begins again during any
fiscal year that begins on or after July 1,2013.
17
- 1-
Bill - amend allocation of revenue.doc .
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056245
OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
April 23, 2010
TO:
FROM:
SUBJECT:
~ounty
Council
Nancy Floreen,
preSident~,
Joseph F. Beach, Directo \ '
Expedited Bill 14-10, Re( rdation Tax-Allocation of Revenue
<?
V'l
The purpose of this memorandum is to transmit a fiscal impact statement to the CouiLcil
on the subject legislation.
.
LEGISLATION SUMMARY
The proposed legislation suspends, for the next two fiscal years, a requirement that
portions ofthe recordation tax be allocated to the cost of County' Government capital projects and rental
assistance programs for low and moderate income households.
FISCAL SUMMARY
Expedited Bill 14-10 will not affect the amount of recordation tax collected but instead
permits the reallocation of$8.221 million in FY11 recordation tax premium revenues from capital
projects and rental assistance programs to the general fund to be used for general purposes. The County
Executive included the use of these revenues in his March 15 recommended operating budget to address
the County's current fiscal challenges by increasing the amount of revenue available to maintain critical
government programs and services.
On April 22, 2010, the County Executive transmitted budget adjustments to the County
Council closing a new projected budget gap of nearly $200 million caused by a significant write-down in
income tax revenues and the need to restore reserves to the policy level of 6 percent of resources. The
Executive recommends redirecting $5 million ofthe portion of the recordation tax currently used to fund
Montgomery College CIP information technology projects. The April 22 budget adjustment package
includes details ofthe College CIP projects affected by this change. The Executive intends to propose an
amendment to Expedited Bill 14-10 to authorize redirection of this additional $5 million to the general
fund.
Office of the Director
101 Monroe Street, 14th Floor· Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Nancy Floreen, President, County Council
April 23, 2010
Page 2
ECONON.UCS~Y
This bill has no quantifiable economic impact.
The following contributed to and concurred with this analysis: Jennifer Bryant, Office of
Management and Budget, and Michael Coveyou, Department of Finance.
JFB: bh
c: Kathleen Boucher, Assistant Chief Administrative Officer
Dee Gonzalez, Offices of the County Executive
Jennifer Bryant, Office of Management and Budget
Michael Coveyou, Department of Finance
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Page 1 of 1
Faden, Michael
From:
Sent:
To:
Madden, Susan {Susan.Madden@montgomerycollege.edu]
Tuesday, May 04, 201011:48 AM
Ervin's Office, Councilmember; Trachtenberg's Office, Councilmember; Navarro's Office,
Councilmember
Healy, Sonya; Bowser, Alan; Faden, Michael; Orlin, Glenn; Sherer, Chuck
recordation tax
Cc:
Subject:
Importance:
High
Attached is the College's impact statement regarding the proposed reductions to the College's information
technology projects funded with recordation tax revenue in the CIP.
We gave this document to Chuck Sherer for his packet for the Education Committee. But, I thought it might be
of interest as MFP deliberates the allocation of the recordation tax revenue. We would be very grateful if the
Council could limit the changes in the allocation of this revenue source to just FY
11.
The proposed reductions ofthe College's IT projects are quite severe --- a 72% reduction. While we certainly
understand the fiscal challenges facing the Council, we ask that you not make a permanent decision for the
allocation of this revenue source for FY
12
and beyond. Please limit the changes to the allocation of the
recordation tax to FY 11 only. With this action, we may be able to keep key projects on track with the possibility
of FY
12
funding from the recordation tax.
Thank you so much for your consideration. Susan
Susan Cottle Madden
Office of the President
Montgomery College
. 5/4/2010
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April 30, 2010
Montgomery College Impact Statement for additional FY11 CIP Budget Reductions
The College understands that the County Executive has recommended a change to the allocation of the
recordation tax revenue for FY2011. The impact of this proposed change in the County Code puts the
College at great risk for a number of reasons. This proposed legislative change has the effect of
eliminating all technology refresh including hardware, software, and maintenance. Our request is that this
proposed change to the County Code be deferred until after the budget session so the proposed
recommendation can receive adequate and thoughtful consideration.
The following executive summary highlights the implications of the proposed budget cuts. MC is currently
engaged in the implementation of several critical projects that are likely to suffer major timeline setbacks
or risk being abandoned all together given the proposed
72% reduction in funding
($12,693,000).
These projects include:
1. CIP - Student Learning Systems
• Replacement of Learning Management System for Distance Learning (all online courses and
materials are impacted - the current system .is end-of-life) - replacement of this system is not
optional and has wide-ranging implications for the delivery of every online and hybrid course
offered at the college. In addition, face to face courses also use this system to communicate with
students-this was evident when the College had to be closed this past winter for one week due
to weather conditions.
• Implementation of the Developmental Math Labs - this is for a state-ofwthe-art math intensive
immersion program that relies heavily on computers and highwend networking for proper
operation. The program is deSigned per a national model that has shown to increase student
learning, retention and satisfaction. Data demonstrated that failure in mathematics is the number
one barrier to successful stUdent retention and graduation from Montgomery College.
Implementation of this new model of mathematiCS instruction and support is viewed as critical if
the College is to succeed in increasing its graduation rate.
2.
CIP - Information Technology
• The college has suspended the replacement of all desktop computers, printers, and other
assorted peripherals. This proposed reduction is nothing less than deferred maintenance, but to
keep the college working properly will require greater expenditures to be made at a later date.
The longer replacements are delayed, the longer it will take, and the more expensive it will be, to
get back on schedule. Dollars will only be expended to replace broken eqUipment.
• Replacement of the Human Resource system (old system is end-of-life) - this system must be
replaced but the loss of funding will impact the time frame for completing this project. This
packqge does more than the straightforward recruiting module and touches every employee on
the campus as it impacts everything from professional development to benefits calculations. This
system also is critical in the College's recruitment of qualified partwtime faculty, upon which the
institution will increaSingly rely due to operating budgetary constraints.
Rock
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• Implementation of Room Scheduling and Reporting System (Impacts room utilization reporting to
the state) - The state has been very focused on this effort and ties future building projects and
formula funding to the College's ability to report high utilization rates. MC currently does not have
this function in place and therefore has more difficulty making successful arguments for additional
space. Further, the current manual system of room scheduling is time intensive and staff
intensive. In addition, it does not necessarily afford the best use of limited space resources. An
automated system would improve the College's ability to schedule in such a way as to maximize
the use of classrooms and lab spaces.
• Student Tracking - Student Tracking has a direct impact on our institution's ability to win
educational grants, as most granting agencies require an assessment of student activity.
Portions of this effort are already in place but the project requires the tying together of many
heterogeneous environments to make the data come together. This project is really the
combination of a lot of smaller projects that feed data into a single repository. The repository has
yet to be assembled, making the benefits of the project impossible to realize.
3. CIP - Network Infrastructure
• Replacement of computing components was planned to support efforts around building a cloud
computing effort. The effort involves the deployment of VCl (Virtual Computer labs) and is
designed to save budget dollars by supplying more cost effective computer images to the PC
desktop in student labs and classrooms - both on and off-campus. This effort allows the college
to more tightly control software costs as well as overcome some of the educational barriers
caused by the lack of PC replacements in the classrooms and labs. Without this project student
achievement will decline as students are forced to rely on outdated equipment.
4. CIP- NOC (Network Operations Center)
• The move is almost complete but there is still work to be done in FY2011. The most visible
impact of this proposed reduction is that the old work space on the Rockville Campus is in need
of consolidation and clean up, so it can be repurposed into useable academic space. The result
is space that could be made available for classrooms and academic offices will sit mostly vacant
waiting for IT dollars to relocate cabling, networking equipment, HVAC, and other equipment that
must be moved in order to turn the space back over to the campus.
t<{)c~\vil'e'.
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*Note: Table supplied by County Council Legislative Analyst:
SUMMARY OF IMPACT ON THE COLLEGE'S REQUEST FOR THE 4 PROJECTS
. Item
FY10
(1,679)
FYll
(1,000)
Sum
(2,679)
1.
Changes the Executive recommended on January 15 and
the Council approved on March 9
2. Changes the Executive recommended on April 22 to
eliminate short term financing
3. Changes the Executive recommended on April 22, other
4. Subtotal, Executive's April 22 changes
5. Total change
(4,514)
(5,500)
(10,014)
(1,679)
(11,014)
(4,514)
(5,500)
(10,014)
(12,693)
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Testimony: Expedited
Bill 14-10
Recordation Tax - Allocation
of
Revenue
Good afternoon, I am Joseph Beach, Director of the Office of Management and Budget,
and I am here to testify on behalf of County Executive Isiah Leggett in support of Expedited Bill
14-10 Recordation Tax - Allocation of Revenue.
This legislation will amend the County law requiring the allocation of certain revenue
received from the recordation tax to be applied to: 1) MCPS Capital projects and College
Infonnation Technology Projects (described as Tier 2 in the Council staff packet); and 2)
County Government capital projects and rental assistance programs (described as Tier
3
in the
packet). The purpose of this amendment is to allow a temporary redirection of these recordation
tax revenues to the general fund for general purposes.
The proposed amendment will not change the rate or estimated collections for this
tax,
but will only allow the funds to be used without restriction. The Executive's proposed budget
recommended that for FYIl all of the recordation
tax
premium revenues (tier
3)
be redirected to
the general fund. The FYII-I6 CIP and the FY11-16 Fiscal Plan assume that these revenues
would resume their previously legislated purpose
in
FY12-16 for both County Government CIP
and rental assistance. The amount that would be redirected to the general fund in FYIl is
estimated at $8.221 million.
The Executive's April 22 budget amendments recommended redirecting $5 million of the
Tier 2 recordation tax revenues from College IT projects to the County General Fund for FYI1
only.
Even though the budget assumptions include the redirection of these revenues for FYll
only, the proposed legislation is recommended with a sunset date for the end ofFY12 in order to
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provide flexibility for the Executive and the Council to provide additional capacity for funding
other government services during this period of severe economic downturn.
We urge the Council to approve this legislation.
May 4, 2010
@
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TESTIMONY OF
THE GREATER CAPITAL AREA ASSOCIATION OF
REAL TORS®
BEFORE THE MONTGOMERY COUNTY COUNCIL REGARDING
"EXPEDITED BILL 14-10, RECORDATION TAX -ALLOCATION OF REVENUE"
May 4, 2010
Council President Floreen and members of the council, my name is Shelly Murray and I am the
2010 President for the Greater Capital Area Association ofREALTORS® ("GCAAR") the
voice of Montgomery County and the District of Columbia's nearly 9,300 REALTORS®,
property managers, title attorneys and other real estate professionals. On behalf of GCAAR, I
would like to express some concerns regarding Bill 14-10.
GCAAR understands the dismal economic conditions that all levels of government as well as the
private sector are still facing today and probably will for several more years. However, as
REALTORS® we strongly believe that the dedication of recordation tax funds towards capital
improvements and rental assistance programs is extremely important. Last year, GCAAR
commented on Bill 15-09, Recordation Tax - Use of Revenue, which we understood to be a
temporary measure and appreciated the fact that the legislation had a sunset provision of 3 years
to July 1,2012. However, GCAAR was ultimately more supportive of the County Council's
final changes to the legislation that had the legislation sunset after only one year to July 1,2010.
We as REALTORS® are very concerned about these recordation tax funds continually being
diverted away from the intended dedication for rental assistance programs and capital
improvement projects. Back in 2007, GCAAR expressed many concerns with Bill 11-07,
Recordation tax Rate, which ultimately increased the recordation taxes on homes above
$500,000. We were very concerned and still are today that Montgomery County remains a
jurisdiction with some of the highest overall costs oftaxes at the time of closing on a home.
However, despite our concerns, we agreed that if the tax rate increased at least the funds raised
should be dedicated to the rental assistance programs and capital improvements. We were told
that these two areas were in dire need of money. So to continue to divert them away from
something essential and just place them in the general fund seems to be counterproductive.
GCAAR understands that revenues are still down, particularly from the real estate industry, but
we are concerned that these funds are going to continue to be depleted. We would strongly
recommend that the county start looking for better sources of revenue and stop relying on real
estate taxes like the recordation and transfer tax, which are extremely volatile, as we've seen the
past few years.
As always, I would like to thank the County Council for your consideration of GCAAR's
perspective on this issue.
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MFPITEM 6
May 6, 2010
Worksession
MEMORANDUM
TO:
FROM:
Management and Fiscal Policy Committee
~
Michael Faden, Senior Legislative Attorney
eo
Glenn arlin, Deputy Staff Director
Worksession: Expedited Bill 14-10, Recordation Tax - Allocation of Revenue
SUBJECT:
Expedited Bill 14-10, Recordation Tax - Allocation of Revenue, sponsored by the Council
President at the request of the County Executive, was introduced on March 23, 2010. A public hearing
was held on May 4 (see testimony, ©15-17).
Recordation tax background As Councilmembers will recall, the County recordation tax,
levied under state law and shown in County Code §52-16B, since 2008 has 3 levels or tiers which
detennine how the revenue from this tax is allocated:
Tier
I
2
3
Rate
$4.40/$1000
$2.50/$1000
$3.10/$1000 (>$500,000)
Use of funds
General Fund (unrestricted)
MCPS capital, College educational technology
50% County government capital improvements
50% new funding for rental assistance programs
Summary Bill 14-10 would suspend for the next 2 fiscal years the current requirement that
certain revenue from the recordation tax (Tier 3) be allocated to the cost of County Government capital
projects and rental assistance programs for low and moderate income households.
On April 27, the Executive proposed a further amendment (see ©7-8) that would also suspend,
for the next 3 fiscal years, the requirement that another portion of the recordation tax (Tier 2) be allocated
to capital improvements to County schools and educational technology for Montgomery College.
Fiscal impact Total reallocations of $13.22 million. See fiscal impact statement on ©9-10 and
OMB Director's testimony on ©15-16. Economic impact: none assumed (effect of lowering rental
assistance funding not discussed).
Options Other options before the Council for allocation of recordation tax revenue include:
• suspend the statutory revenue allocations in Tiers 2-3 only for the next fiscal year, FYl1 (this
was Montgomery College's recommendation see ©11-14);
• repeal the statutory revenue allocations in Tiers 2-3 so that all recordation tax revenue goes to
the General Fund and is available for any appropriation.
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At the hearing Council member Knapp asked, if this revenue is reallocated as the Executive
proposed, what amount would be moved from current revenue funding to bond funds. OMB Director
Beach said he would have that number for the Committee.
This packet contains:
Expedited Bill 14-10
Legislative Request Report
Memo from County Executive
Amendment memo from County Executive
Executive amendment
Fiscal Impact Statement
Memo from Montgomery College
Executive testimony
GCAAR testimony
F:\LAw\BlLLS\1014 Recordation Tax\MFP Memo.Doc
Circle
#
1
3
4
7
8
9
11
15
17
2
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Expedited Bill No.
14-10
Concerning: Recordation Tax­
Allocation of Revenue
Revised: 3-22-10
Draft No. _1_
Introduced:
March 23, 2010
Expires:
September 23,2011
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _--::-::--_ _ _ _---"_ _
Sunset Date:
-!..!N~on:..!.::e~
_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
AN EXPEDITED ACT
to:
(1)
revise the allocation of certain revenue received from the recordation
tax;
and
(2)
generally amend County law related to the recordation tax.
By amending
Laws of Montgomery County 2009
Chapter 17
Boldface
Underlining
[Single boldface brackets]
QQuble underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law
by
original hill.
Deletedfrom existing law
by
original
bill.
Added
by
amendment.
Deletedfrom existing law or the
bill by
amendment.
Existing law unaffected
by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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ExPEDITED
BILL No. 14-10
1
Sec.
1.
Chapter 17 of the Laws of Montgomery County 2009 is amended
as follows:
2
3
4
*
*
*
Sec. 3. Allocation of Revenue. During any fiscal year that begins on or after
July 1, [2010] 2012, the net revenue attributable to the increase in the rate of the
recordation tax enacted in this Act must be reserved for and allocated equally to:
(a)
(b)
the cost of County government capital improvements; and
rental assistance programs for low- and moderate-income households,
which must not be used to supplant any otherwise available funds.
Sec. 2. Expedited Effective Date.
The Council declares that this legislation
IS
5
6
7
8
9
10
11
12
necessary for the immediate
protection of the public interest. This Act takes effect on the date when
it
becomes
law.
Approved:
13
14
15
16
17
18
Nancy Floreen, President, County Council
Approved:
Date
19
20
21
Isiah Leggett, County Executive
This is a correct copy ofCouncil action.
Date
22
23
24
25
Linda M. Lauer, Clerk of the Council
Date
F:\LAVV'lBILLS\1014 Recordation Tax\BiII1.DOC
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LEGISLA TIVE REQUEST REPORT
Expedited
Bill
14-10
Recordation Tax - Allocation of Revenue
DESCRIPTION:
This Bill would suspend the current requirement that portions of the
recordation tax be allocated to: (a) the cost of County Government capital
projects; and (b) rental assistance programs for low and moderate income
households.
In order to meet current fiscal challenges facing the County, the County
must increase the amount of revenue available to maintain core
Government programs and services.
To enhance the amount of revenue available to support core government
programs and services.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
Office of Management and Budget; Department of Finance
FISCAL IMPACT:
To be requested.
ECONOMIC
IMPACT:
EVALUATION:
To be requested.
Subject to the general oversight of the County Executive and the County
Council.
EXPERIENCE
ELSEWHERE:
SOURCES OF
INFORMATION:
Joseph Beach, Director of Management and Budget
Kathleen Boucher, Assistant Chief Administrative Officer
Marc Hansen, Acting County Attorney
APPLICATION
Revenue laws apply County-wide.
WITHIN
MUNICIPALITIES:
PENALTIES:
N/A.
F:\LAW\BILLS\I 0 14 Recordation Tax\LRR.DOC
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE. MARYLAND 20850
lsiah
.~~"''''~
..
County Executive
MEMORANDUM
March 18,2010
TO:
FROM:
SUBJECT:
Nancy Floreen, Council President
Isiah Leggett, County
Executive~tJ3~t-,0~-­
)
0'
(
:~
FY 2011 Budget Reconciliation and Financing Act
I am attaching for Council's consideration a Budget Reconciliation and Financing
Act (BRFA) which makes changes to the County Code that are necessary to reconcile my
recommended FY 2011 operating budget with projected FY 2011 revenues. This bill will help
the County address its current fiscal challenges by increasing the amount of revenue available to
maintain and enhance core government programs and services. I am also attaching a Legislative
Request Report for the bill. A Fiscal Impact Statement will be transmitted to Council soon.
The BRFA consists of five primary components. First, it increases the energy tax
rates. Second, it temporarily redirects the portion of recordation tax revenues that are currently
reserved for County Govemment capital projects and rental assistance programs to the general
fund for general purposes. Third, it allows revenues generated by the Water Quality Protection
Charge to be used to pay debt service on bonds that fund stonnwater management infi:astructure
projects. Fourth, it transfers responsibility for administering equal employment opportunity
programs from the Office of Human Resources to the Office of Human Rights. Fifth, it
authorizes the Fire and Rescue Service to impose an Emergency Medical Services (EMS)
Transport Fee.
As the Council knows, the County's energy tax is actuaUy a tax on fuel oil,
natural gas, and electric utility providers which is passed on to all utility customers. Because the
energy tax is a broad-based tax, its impact on families is reduced by the fact that it is paid by
businesses and households, and all levels of govemment, including federal agencies located in
the County (that currently do not pay any other major County tax). Additionally, the energy tax
is a consumption tax based on energy usage.
It
is not based on the overall size of the utility bill
or the cost per unit of energy used as billed to the consumer. Therefore, the amount of the tax
can be lessened by reduced energy usage. Based on existing usage patterns for the average
homeowner, my recommended FY 2011 budget assumes an average increase in the energy tax of
approximately $2.90 per month. I have also recommended additional funding
in
the Health and
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Nancy Floreen, Council President
March 18,2010
Page 2
Human Services budget for the County's Energy Assistance Program to minimize the impact to
low-income households.
My recommended FYII budget contains several efforts to restructure County
Government to improve responsiveness and efficiency. One of these changes is the transfer of
the Equal Employment Opportunity program from the Office of Human Resources to the Office
of Human Rights. This shift takes advantage of existing staff resources to reduce costs and
leverage the efforts of County staff to produce better outcomes for the community. This bill
modifies the County code provisions relating to the responsibilities of the Office of Human
Resources and Office of Human Rights to reflect this change.
The EMS Transport Fee is needed to fund fire and rescue services in the County.
Without this fee, emergency response to residents will be impaired. EMS Transport Fees are
widely employed throughout the nation and by local governments throughout the Washington
region. These jurisdictions have not experienced any indication that people decline to use
emergency transports as a result of the imposition of an ambulance fee. By creating a prepaid
fund for uninsured County residents, the legislation that I am transmitting imp-oses a fee only on
County residents with health insurance which covers EMS Transports. This arrangement more
equitably distributes the economic burden of providing EMS transport services in the County
between residents and nonresidents. The legislation provides for a hardship waiver for
nonresidents who fall below 300 percent of federal poverty guidelines.
To provide the Council with a complete picture of the EMS Transport
program created by this bill, I am attaching a copy of the proposed Executive Regulation to
implement the fee. This proposed regulation will be published in the April 2010 County Register
and submitted to Council after the 30-day public comment period ends on April 30.
Finally, I note that the BRF A is consistent with Bill 31-09, Consideration of
Bills - One Subject (enacted on September 29,2009), which requires that a bill "contain only
one subject matter".' As noted in the Council staff packet for Bill 31-09, that bill was intended to
adopt the "one subject rule" of the Maryland Constitution, which requires all laws enacted by the
General Assembly to contain only one subject. The Maryland Attorney General has repeatedly
concluded that budget reconciliation and financing bills do not conflict with the one subject rule.
For example, in 2005, the Attorney General noted that "[fJor the past fourteen years, 15 budget
reconciliation, budget reconciliation and financing acts or variations thereof, have been used to
balance budgets, raise revenue, make fund transfers, redistribute funds, cut mandated
appropriations and authorize or mandate appropriations.") The Attorney General concluded that
all of those bills were consistent with the one subject rule because the provisions ofthe bills were
"clearly germane to the single subject of financing State and local government".
See Panitz v.
Comptroller a/the Treasury,
247 Md. 501 (1967) (Omnibus supplemental appropriation bill
comprised a single subject for purposes of § 29 of
Art
III ofthe State Constitution even though
See May 19, 2005 memorandum from Attorney General
J.
Joseph Curran, Jr.
to
Governor Robert Ehrlich
""0',,,'11,,,
House Bill 147 (2005).
!
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Nancy Floreen, Council President
March 18,2010
Page 3
the bill combined such diverse elements as police aid to local government; teacher salaries and
pensions; and general unrestricted grants to local government).
Attachments (3)
cc:
Joseph Adler, Director, Office of Human Resources
Jennifer Barrett, Director, Finance Department
Joseph Beach, Director, OMB
Kathleen Boucher, ACAO
Richard Bowers, Fire Chief, MCFRS
Marc Hansen, Acting County Attorney
Robert Hoyt, Director, DEP
Richard Y. Nelson, Jr., Director, DHCA
James Stowe, Director, Office of Human Rights
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OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
ROCKVILLE, MARYLAND 20B50
MEMORANDUM
April 27, 2010
TO:
Nancy Floreen, President
Montgomery County Council
FROM:
Wah
Leggett, County Executive
-P
~
)
.a
SUBJECT:
Proposed Amendment
to
Bi1l14-10,
Recordation Tax-Allocation of Revenue
The County has experienced a steep decline in projected revenues from the income
tax.
This decline combined with the need to restore the County's reserVe ltwels to the 6% policy
level has opened a
FY-11
budget gap of approximately
$200
million.
A
major part of my
recommended strategy for closing this budget gap is to reduce current revenue funding of capital
projects.
In
order to implement this strategy I am reluctantly recommending that Bill
14-10,
Recordation Tax-Allocation ofRevenue, be amended to suspend for two years the current
requirement that a portion of the recordation
tax
be allocated to the cost of capital improvements
to schools and educational technology for Montgomery College. A draft amendment to
Bi1114­
lOis attached to this memorandum.
IL:tjs
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ExPEDITED BILL
No.
[CLICK - TYPE NUMBER]
1
2
3
4
Proposed Amendment to Bill 14-10
5
6
7
Sec. 2. Chapter 9 of the Laws of Montgomery County 2002, Sec 4, as
amended by Chapter 21 of the Laws of Montgomery County 2003, and
further amended by Chapter 33 of the Laws of Montgomery County 2003, is
further amended as follows:
Sec. 4. Allocation of Revenue
During any fiscal year that begins on or after July 1, 2004, the net revenue
attributable to the increase
in
the rate of the recordation tax enacted in this Act must
be reserved for and allocated to the cost of capital improvements to schools and
educational technology for Montgomery College in the form of debt service for debt-
eligible projects and current revenue for debt-eligible or non-debt-eligible projects.
This
~llocation
8
9
10
11
12
13
14
15
16
ends as of the effective date of this Act and begins again during any
fiscal year that begins on or after July 1,2013.
17
- 1-
Bill - amend allocation of revenue.doc .
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056245
OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
April 23, 2010
TO:
FROM:
SUBJECT:
~ounty
Council
Nancy Floreen,
preSident~,
Joseph F. Beach, Directo \ '
Expedited Bill 14-10, Re( rdation Tax-Allocation of Revenue
<?
V'l
The purpose of this memorandum is to transmit a fiscal impact statement to the CouiLcil
on the subject legislation.
.
LEGISLATION SUMMARY
The proposed legislation suspends, for the next two fiscal years, a requirement that
portions ofthe recordation tax be allocated to the cost of County' Government capital projects and rental
assistance programs for low and moderate income households.
FISCAL SUMMARY
Expedited Bill 14-10 will not affect the amount of recordation tax collected but instead
permits the reallocation of$8.221 million in FY11 recordation tax premium revenues from capital
projects and rental assistance programs to the general fund to be used for general purposes. The County
Executive included the use of these revenues in his March 15 recommended operating budget to address
the County's current fiscal challenges by increasing the amount of revenue available to maintain critical
government programs and services.
On April 22, 2010, the County Executive transmitted budget adjustments to the County
Council closing a new projected budget gap of nearly $200 million caused by a significant write-down in
income tax revenues and the need to restore reserves to the policy level of 6 percent of resources. The
Executive recommends redirecting $5 million ofthe portion of the recordation tax currently used to fund
Montgomery College CIP information technology projects. The April 22 budget adjustment package
includes details ofthe College CIP projects affected by this change. The Executive intends to propose an
amendment to Expedited Bill 14-10 to authorize redirection of this additional $5 million to the general
fund.
Office of the Director
101 Monroe Street, 14th Floor· Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Nancy Floreen, President, County Council
April 23, 2010
Page 2
ECONON.UCS~Y
This bill has no quantifiable economic impact.
The following contributed to and concurred with this analysis: Jennifer Bryant, Office of
Management and Budget, and Michael Coveyou, Department of Finance.
JFB: bh
c: Kathleen Boucher, Assistant Chief Administrative Officer
Dee Gonzalez, Offices of the County Executive
Jennifer Bryant, Office of Management and Budget
Michael Coveyou, Department of Finance
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Page 1 of 1
Faden, Michael
From:
Sent:
To:
Madden, Susan {Susan.Madden@montgomerycollege.edu]
Tuesday, May 04, 201011:48 AM
Ervin's Office, Councilmember; Trachtenberg's Office, Councilmember; Navarro's Office,
Councilmember
Healy, Sonya; Bowser, Alan; Faden, Michael; Orlin, Glenn; Sherer, Chuck
recordation tax
Cc:
Subject:
Importance:
High
Attached is the College's impact statement regarding the proposed reductions to the College's information
technology projects funded with recordation tax revenue in the CIP.
We gave this document to Chuck Sherer for his packet for the Education Committee. But, I thought it might be
of interest as MFP deliberates the allocation of the recordation tax revenue. We would be very grateful if the
Council could limit the changes in the allocation of this revenue source to just FY
11.
The proposed reductions ofthe College's IT projects are quite severe --- a 72% reduction. While we certainly
understand the fiscal challenges facing the Council, we ask that you not make a permanent decision for the
allocation of this revenue source for FY
12
and beyond. Please limit the changes to the allocation of the
recordation tax to FY 11 only. With this action, we may be able to keep key projects on track with the possibility
of FY
12
funding from the recordation tax.
Thank you so much for your consideration. Susan
Susan Cottle Madden
Office of the President
Montgomery College
. 5/4/2010
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April 30, 2010
Montgomery College Impact Statement for additional FY11 CIP Budget Reductions
The College understands that the County Executive has recommended a change to the allocation of the
recordation tax revenue for FY2011. The impact of this proposed change in the County Code puts the
College at great risk for a number of reasons. This proposed legislative change has the effect of
eliminating all technology refresh including hardware, software, and maintenance. Our request is that this
proposed change to the County Code be deferred until after the budget session so the proposed
recommendation can receive adequate and thoughtful consideration.
The following executive summary highlights the implications of the proposed budget cuts. MC is currently
engaged in the implementation of several critical projects that are likely to suffer major timeline setbacks
or risk being abandoned all together given the proposed
72% reduction in funding
($12,693,000).
These projects include:
1. CIP - Student Learning Systems
• Replacement of Learning Management System for Distance Learning (all online courses and
materials are impacted - the current system .is end-of-life) - replacement of this system is not
optional and has wide-ranging implications for the delivery of every online and hybrid course
offered at the college. In addition, face to face courses also use this system to communicate with
students-this was evident when the College had to be closed this past winter for one week due
to weather conditions.
• Implementation of the Developmental Math Labs - this is for a state-ofwthe-art math intensive
immersion program that relies heavily on computers and highwend networking for proper
operation. The program is deSigned per a national model that has shown to increase student
learning, retention and satisfaction. Data demonstrated that failure in mathematics is the number
one barrier to successful stUdent retention and graduation from Montgomery College.
Implementation of this new model of mathematiCS instruction and support is viewed as critical if
the College is to succeed in increasing its graduation rate.
2.
CIP - Information Technology
• The college has suspended the replacement of all desktop computers, printers, and other
assorted peripherals. This proposed reduction is nothing less than deferred maintenance, but to
keep the college working properly will require greater expenditures to be made at a later date.
The longer replacements are delayed, the longer it will take, and the more expensive it will be, to
get back on schedule. Dollars will only be expended to replace broken eqUipment.
• Replacement of the Human Resource system (old system is end-of-life) - this system must be
replaced but the loss of funding will impact the time frame for completing this project. This
packqge does more than the straightforward recruiting module and touches every employee on
the campus as it impacts everything from professional development to benefits calculations. This
system also is critical in the College's recruitment of qualified partwtime faculty, upon which the
institution will increaSingly rely due to operating budgetary constraints.
Rock
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• Implementation of Room Scheduling and Reporting System (Impacts room utilization reporting to
the state) - The state has been very focused on this effort and ties future building projects and
formula funding to the College's ability to report high utilization rates. MC currently does not have
this function in place and therefore has more difficulty making successful arguments for additional
space. Further, the current manual system of room scheduling is time intensive and staff
intensive. In addition, it does not necessarily afford the best use of limited space resources. An
automated system would improve the College's ability to schedule in such a way as to maximize
the use of classrooms and lab spaces.
• Student Tracking - Student Tracking has a direct impact on our institution's ability to win
educational grants, as most granting agencies require an assessment of student activity.
Portions of this effort are already in place but the project requires the tying together of many
heterogeneous environments to make the data come together. This project is really the
combination of a lot of smaller projects that feed data into a single repository. The repository has
yet to be assembled, making the benefits of the project impossible to realize.
3. CIP - Network Infrastructure
• Replacement of computing components was planned to support efforts around building a cloud
computing effort. The effort involves the deployment of VCl (Virtual Computer labs) and is
designed to save budget dollars by supplying more cost effective computer images to the PC
desktop in student labs and classrooms - both on and off-campus. This effort allows the college
to more tightly control software costs as well as overcome some of the educational barriers
caused by the lack of PC replacements in the classrooms and labs. Without this project student
achievement will decline as students are forced to rely on outdated equipment.
4. CIP- NOC (Network Operations Center)
• The move is almost complete but there is still work to be done in FY2011. The most visible
impact of this proposed reduction is that the old work space on the Rockville Campus is in need
of consolidation and clean up, so it can be repurposed into useable academic space. The result
is space that could be made available for classrooms and academic offices will sit mostly vacant
waiting for IT dollars to relocate cabling, networking equipment, HVAC, and other equipment that
must be moved in order to turn the space back over to the campus.
t<{)c~\vil'e'.
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*Note: Table supplied by County Council Legislative Analyst:
SUMMARY OF IMPACT ON THE COLLEGE'S REQUEST FOR THE 4 PROJECTS
. Item
FY10
(1,679)
FYll
(1,000)
Sum
(2,679)
1.
Changes the Executive recommended on January 15 and
the Council approved on March 9
2. Changes the Executive recommended on April 22 to
eliminate short term financing
3. Changes the Executive recommended on April 22, other
4. Subtotal, Executive's April 22 changes
5. Total change
(4,514)
(5,500)
(10,014)
(1,679)
(11,014)
(4,514)
(5,500)
(10,014)
(12,693)
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Testimony: Expedited
Bill 14-10
Recordation Tax - Allocation
of
Revenue
Good afternoon, I am Joseph Beach, Director of the Office of Management and Budget,
and I am here to testify on behalf of County Executive Isiah Leggett in support of Expedited Bill
14-10 Recordation Tax - Allocation of Revenue.
This legislation will amend the County law requiring the allocation of certain revenue
received from the recordation tax to be applied to: 1) MCPS Capital projects and College
Infonnation Technology Projects (described as Tier 2 in the Council staff packet); and 2)
County Government capital projects and rental assistance programs (described as Tier
3
in the
packet). The purpose of this amendment is to allow a temporary redirection of these recordation
tax revenues to the general fund for general purposes.
The proposed amendment will not change the rate or estimated collections for this
tax,
but will only allow the funds to be used without restriction. The Executive's proposed budget
recommended that for FYIl all of the recordation
tax
premium revenues (tier
3)
be redirected to
the general fund. The FYII-I6 CIP and the FY11-16 Fiscal Plan assume that these revenues
would resume their previously legislated purpose
in
FY12-16 for both County Government CIP
and rental assistance. The amount that would be redirected to the general fund in FYIl is
estimated at $8.221 million.
The Executive's April 22 budget amendments recommended redirecting $5 million of the
Tier 2 recordation tax revenues from College IT projects to the County General Fund for FYI1
only.
Even though the budget assumptions include the redirection of these revenues for FYll
only, the proposed legislation is recommended with a sunset date for the end ofFY12 in order to
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provide flexibility for the Executive and the Council to provide additional capacity for funding
other government services during this period of severe economic downturn.
We urge the Council to approve this legislation.
May 4, 2010
@
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TESTIMONY OF
THE GREATER CAPITAL AREA ASSOCIATION OF
REAL TORS®
BEFORE THE MONTGOMERY COUNTY COUNCIL REGARDING
"EXPEDITED BILL 14-10, RECORDATION TAX -ALLOCATION OF REVENUE"
May 4, 2010
Council President Floreen and members of the council, my name is Shelly Murray and I am the
2010 President for the Greater Capital Area Association ofREALTORS® ("GCAAR") the
voice of Montgomery County and the District of Columbia's nearly 9,300 REALTORS®,
property managers, title attorneys and other real estate professionals. On behalf of GCAAR, I
would like to express some concerns regarding Bill 14-10.
GCAAR understands the dismal economic conditions that all levels of government as well as the
private sector are still facing today and probably will for several more years. However, as
REALTORS® we strongly believe that the dedication of recordation tax funds towards capital
improvements and rental assistance programs is extremely important. Last year, GCAAR
commented on Bill 15-09, Recordation Tax - Use of Revenue, which we understood to be a
temporary measure and appreciated the fact that the legislation had a sunset provision of 3 years
to July 1,2012. However, GCAAR was ultimately more supportive of the County Council's
final changes to the legislation that had the legislation sunset after only one year to July 1,2010.
We as REALTORS® are very concerned about these recordation tax funds continually being
diverted away from the intended dedication for rental assistance programs and capital
improvement projects. Back in 2007, GCAAR expressed many concerns with Bill 11-07,
Recordation tax Rate, which ultimately increased the recordation taxes on homes above
$500,000. We were very concerned and still are today that Montgomery County remains a
jurisdiction with some of the highest overall costs oftaxes at the time of closing on a home.
However, despite our concerns, we agreed that if the tax rate increased at least the funds raised
should be dedicated to the rental assistance programs and capital improvements. We were told
that these two areas were in dire need of money. So to continue to divert them away from
something essential and just place them in the general fund seems to be counterproductive.
GCAAR understands that revenues are still down, particularly from the real estate industry, but
we are concerned that these funds are going to continue to be depleted. We would strongly
recommend that the county start looking for better sources of revenue and stop relying on real
estate taxes like the recordation and transfer tax, which are extremely volatile, as we've seen the
past few years.
As always, I would like to thank the County Council for your consideration of GCAAR's
perspective on this issue.