Understanding Wicomico County Revenue Cap
Learn about the Wicomico County Revenue Cap, a policy that limits revenue from real property taxes, its challenges, effects on revenue and taxes, and options moving forward. Explore how this cap impacts the county's financial management and public services.
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Presentation Transcript
Wicomico County Revenue Cap Developed By: The Greater Salisbury Committee Data Collection and Analysis Provided By: BEACON at Salisbury University
What is the Revenue Cap? Limits the County s revenue from real property taxes The County s revenue can increase by 2% from the previous year or the CPI-U rate The max revenue increase is the minimum between CPI-U and 2% When real estate values decrease, the property tax rate can increase. When real estate values increase, the property tax rate can decrease The objective of the revenue cap is to limit wasteful government spending and eliminate unexpected large tax increases
Revenue Cap Challenges The cap only works in an environment where inflation is 2% or less The language of the cap makes County revenues fall behind the total allowable revenue. The CPI-U rate is not an accurate measure of the rate of change in local government expenditures. The revenue cap is not designed to accommodate unfunded state or federal mandates The revenue cap does not have an emergency contingency provision to allow elected officials to address extraordinary budgetary demands in cases of disasters or major economic disruptions
Effects on Revenue The County has been unable to collect and use over $15 million dollars from 2006-2016 CPI-U has been higher than 2% over the last 10 years Should this continue to occur, the County will continue to lose out on millions of dollars at a faster rate on a year-to-year basis. 48% of the County s revenue is from local property taxes The County s revenue is used to fund public services (education, public health and safety, facilities, etc.)
Effects on Taxes Due to previous tax increases below the cap, the current taxes are below prior levels when adjusted for inflation If the current tax rate is increased by 6%, the owner of a median value home in the County ($172,400) would only pay $99 more that year in property taxes Compare this to having a 16oz coffee from Starbucks 3x per week: 1 year costs = $612 The increases in property taxes collected could be used to improve roads, educational services, buildings, and other public services used by residents Increases in property taxes can also provide cushion for the County against recessions that will limit public services to residents
Options Moving Forward Change the language of the cap to be able to take the higher of CPI-U or 2% each year Using a different inflation index (S&L IPD) instead of the CPI-U index Implement a safety valve which allows flexibility to cap limits in case of drastic economic changes. Typically requires a majority vote either by the public or pre-determined board. Using homestead exemptions (save on taxes on a person s home) or circuit breaker programs (benefits to taxpayers, with benefits increasing as incomes decline) Implement a sunset/reset clause which will automatically terminate the cap after a fixed time period unless it is extended. Elimination of the revenue cap?
