Agenda Item 4
May 18,2011
Action
MEMORANDUM
TO:
FROM:
County Council
.~
Michael Faden, Senior Legislative Attorney
'<'
Glenn Orlin, Deputy Staff Director
Action: Expedited Bill 10-11, Recordation Tax - Allocation of Revenue
SUBJECT:
Government Operations and Fiscal Policy Committee recommendation: enact as
introduced.
Expedited Bill 10-11, Recordation Tax - Allocation of Revenue, sponsored by the
Council President at the request of the County Executive, was introduced on April 5, 2011. At
the public hearing held on April 26, the only speaker, a representative of the Greater Capital
Area Association of Realtors (GCAAR), opposed the Bill (see testimony, ©6-7). The Executive
did not testify or send a representative. The Government Operations and Fiscal Policy
Committee held a worksession on this Bill on May 3.
Summary Bill 10-11 would suspend for fiscal year 2012 the current law's requirement
that certain revenue from the recordation tax (Tier 3, explained below) must be allocated to the
cost of County Government capital projects and rental assistance programs for low and moderate
income households.
Recordation tax background The County recordation tax, levied under state law and
shown in County Code §52-16B, has (since 2008) 3 levels or tiers which determine how the
revenue from this tax is allocated:
Tier
1
2
3
Rate
Use of funds
$4.40 per $1000
General Fund (unrestricted)
$2.50 per $1000
MCPS capital, College educational technology
$3.10 per $1000 (>$500,000) 50% County government capital improvements
50% new funding for rental assistance programs
When the Council enacted a similar Bill (Bill 14-10) last year for the current fiscal year,
that Bill also suspended the requirement that Tier 2 recordation tax revenue be allocated to
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MCPS capital improvements and College educational technology. This Bill, as drafted by the
Executive. would not reallocate Tier 2 revenue.
Fiscal impact
Total reallocations of $8.3 million (Tier 3 only). See fiscal impact
statement on ©5.
Economic impact:
none assumed (effect of lowering rental assistance funding
not discussed).
Options
Options to allocate County recordation tax revenue include:
1) suspend the statutory revenue allocations in Tier 3 for the next fiscal year, FY12, as
the Executive proposed;
2) suspend the statutory revenue allocations in Tiers 2 and 3 for the next fiscal year,
FY12, as the Executive proposed and the Council did last year;
3) suspend the statutory revenue allocations in Tiers 2 and 3 for the next several (say 3)
fiscal years, so this kind of legislation will not be needed every year;
4) 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.
In its testimony, GCAAR argued that "decisions like this ... would divert funds from the
uses that justified their collection in the first place". GCAAR also cited other pending or
potential federal legislation that would negatively impact the "fragile housing market", as well as
the need for more, rather than less, rental assistance funding. Proponents of this Bill would
counter that severe fiscal stresses on the County require greater flexibility in using available
revenues. They also would note that this Bill gives the Council more latitude
in
reallocating
these funds, but does not require any reallocation; that decision would be made in the operating
budget resolution.
Council staff recommendation:
option 2, suspend the statutory revenue allocation for
the next year. It's clear that the County's fiscal situation will not improve markedly next year, so
this kind of flexibility will continue to be necessary.
Committee recommendation:
enact as introduced (option 1); suspend allocation of Tier
3 only in Fy12.
This packet contains
Expedited Bill 10-11
Legislative Request Report
Memo from County Executive
Fiscal impact statement
GCAAR testimony
F:\LAWIBILLSIlll 0 Recordation Tax-Allocation Of RevenuelAction Memo,Doc
Circle
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Expedited Bill No.
----'1:..:::0~-1'-!.1
_ _ __
Concerning:
Recordation
Tax
Allocation of Revenue
Revised: March 31, 2011 Draft No._1_
Introduced:
April 5, 2011
Expires:
October 5, 2012
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: ...!N..,!.;:o=n=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 2010
Chapter 19
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
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 10-11
1
Sec.
1.
Chapter 19 of the Laws of Montgomery County 2010 is amended
as follows:
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3
4
5
* *
*
Sec. 3. Allocation of Revenue. During any fiscal year that begins on or after
July 1, [2011] 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)
the cost of County government capital improvements; and
6
7
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(b) 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 necessary for the immediate
protection of the public interest. This Act takes effect on the date when it becomes
law.
Approved:
9
10
11
12
13
14
15
16
17
18
19
Valerie Ervin, President, County Council
Approved:
Date
20
21
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23
Isiah Leggett, County Executive
This is a correct copy of Council action.
Date
24
25
26
Linda M. Lauer, Clerk of the Council
Date
@
F:\LAw\BILLS\111 0 Recordation Tax-Allocation Of Revenue\BiII.Doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill 10-11
Recordation Tax
-
Allocation ofRevenue
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 the 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 and 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.
Not applicable.
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
Joseph Beach, Director, Office of Management and Budget;
Kathleen Boucher, Assistant Chief Administrative Officer; and
Marc P. Hansen, County Attorney.
APPLICATION
Revenue laws apply County wide.
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable.
F:ILAWIBlLLSI\\\ 0 Recordation Tax-Allocation Of RevenueIRecordation Tax LRR.DOC
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OFFICE OF THE C01JNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
Isiah Leggett
County Executive
MEMORANDUM
March 15,2011
TO:
Valerie Ervin, President
Montgomery County Council
Isiah Leggett, County
Executiv~~-
Proposed Legislation - Recordation Tax - Allocation of Revenue
FROM:
SUBJECT:
I am attaching for the Council's consideration a bill that 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.
I am also attaching a Legislative Request Report and Fiscal and Economic Impact
Statement for the bill. Thank you for your prompt consideration of this legislation. I look
forward to working with the Council as it considers this proposal.
.
Attachments (2)
c: Jennifer Barrett, Director, Department of Finance
Joseph F. Beach, Director, Office of Management and Budget
Kathleen Boucher, Assistant Chief Administrative Officer
Marc Hansen, County Attorney
montgomerycQuntymd.gov/311
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240-773-3556 TTY
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph F. Beach
Director
MEMORANDUM
March 15,2011 .
TO:
FROM;
SUBJECT:
Valerle Ervin. President, County Council
Joseph
F.
Beach'~·
Expedited Bill
XX-lO,
Recordation Tax-Allocation ofRevenue
The purpose ofthis memorandum is to transmit a fiscal impact statement to the Council
on the subject legislation.
.
LEGISLATION SUMMARY
The proposed legislation suspends, for one fiscal year,
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
The subject legislation will not affect the amount of recordation
tax.
collected, but instead
permits the reallocation of an estimated $8.3 million in FY12 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 ofthese 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.
ECONOMIC SUMMARY
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 ofFinance.
JFB:bh
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices ofthe County Executive
Jennifer Bryant, Office ofManagement and Budget
Michael Coveyou, Department ofFinaDce
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _-=O:.:ffi::.:::ce of the Director
101 Monroe Street, 14th Floor • Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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~
Gclir;f'c.
GREATER CAPITAL AREA ASSOCIATION OF REALTORS
1D
TESTIMONY OF
THE GREATER CAPITAL AREA ASSOCIATION OF REAL TORS®
BEFORE THE MONTGOMERY COUNTY COUNCIL REGARDING
"EXPEDITED BILL
10-11,
RECORDATION TAX -ALLOCATION OF REVENUE"
April 26, 2011
Council President Ervin and members of the council, my name is Bonnie Casper and I am the
2011 President-elect for the Greater Capital Area Association ofREALTORS® ("GCAAR")
the voice of Montgomery County and the District of Columbia's nearly 9,000 REALTORS®,
property managers, title attorneys and other real estate professionals. On behalf of GCAAR, I
would like to express our opposition and some concerns regarding Bill 10-11.
GCAAR appreciates the fact that the Montgomery County government is facing difficult
budgetary decisions. However, GCAAR is concerned with one such decIsion in particular - the
decision to divert funds that have been collected in County recordation taxes from certain capital
purposes and rental assistance to the general fund.
In
fact, it is our understanding from last
year's bill, Expedited Bil114-1O, that the planned reallocation was to be $8.221 million in FY
'11 recordation tax premium revenues. These monies, in accordance with County Code 52-16B,
were to have been collected for the purposes of capital construction and rental assistance.
It
is
mislead-ing to divert them from these important uses. When this was adopted originally in 2007
GCAAR agreed that increasing the recordation tax rate was acceptable if the increase was
dedicated to rental assistance. To change that would break faith with these prior decisions - and
would cause real harm to those most vulnerable who need that assistance. Furthermore,
decisions like this that would divert funds from the uses that justified their collection in the first
place undermines credibility.
To put the criticality of this matter in context, we must consider that the US Congress is currently
considering legislation that would eliminate the mortgage interest deduction, lower the
conforming loan limits, and abolish Fannie Mae and Freddie Mac - the institutions that have
enabled the mortgage market to finance long-term loans. If Congress enacts all or any of these
provisions, the fragile housing market will be negatiVely impacted. In addition, in this morning's
Washington Post, there was an article by Dina EIBoghdady entitled "Study: Affordable rental
housing scarce ... 26 percent of tenants spend more than half their income per month". The
article cites a Harvard University Study and concludes by saying ... "the number of people who
rent shot up 8 percent nationally and 12 percent locally between 2007 and 2009, Census Bureau
figures show. As demand surged, rents climbed 3 percent nationwide and 5 percent in this
region." This statistic will only get worse if Congress passes its legislation thus putting more
and more pressure on folks to find rental housing that is affordable. This is not the time to divert
funds from rental assistance programs.
REALfOW
8757 C':;EORGIA AVENUE· SUITE 600 • SILVER SPRING, MD 20910-3737
PHONE 301,590.2000 • FAX 301 ,590.2248
www.gcaor.com
EOUAL. HOUSINQ
OPPOfl~UNITY
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This will be the third year in a row that GCAAR is commenting on legislation regarding the use
of revenue from the recordation tax. And every year we have stressed this should be a temporary
measure.
Therefore, in the event you pass legislation that does continue to divert these funds from rental
assistance please do not thereafter enact legislation which increases the recordation tax if you
are going to use the special purposes of supporting rental assistance as your justification for
doing so!
As always, I would like to thank the County Council for your consideration of GCAAR's
perspective on this issue.
2