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Taxes and rates would increase in proposed Hagerstown budget

April 02, 2002|BY DAN KULIN /Staff Writer

dank@herald-mail.com

Taxes and water and sewer rates would all increase in Hagerstown under City Administrator Bruce Zimmerman's proposed $79.55 million budget, which was made public Monday.

The city real estate and business equipment tax rates would both increase 7.2 percent in the fiscal year beginning July 1. The tax increases would pay for raises for city employees, higher employee health insurance and workers' compensation insurance costs, as well as increased spending on replacement vehicles and construction projects, Zimmerman said.

The proposed budget also calls for hiring two more firefighters, borrowing $12.7 million for improvements at the city water and sewer plants, and borrowing about $500,000 to buy a new fire engine, finish replacing the City Park lake wall, and help pay for the design of the long-planned Southern Boulevard, which is also known as the Funkstown Bypass.

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Mayor William M. Breichner and most City Council members said Monday they had expected Zimmerman's proposed budget to call for tax and rate increases, which city projections have long predicted.

Although the mayor and council members said they had not yet looked through the proposed budget, many said they hope to find a way to reduce the proposed increases. The council will spend the next two months reviewing the spending plan, and could make many changes before voting on a budget at the end of May.

"I'm not shocked. But we still have to delve into the details. ... I would hope (the tax increase) is less," Breichner said.

"I don't think anyone in the city thought there wouldn't be (a tax increase)," Councilman N. Linn Hendershot said. "But we'll be looking to minimize it best we can."

Last year, Zimmerman's proposed budget called for increasing the real estate and business equipment tax rates 10.5 percent each. After cutting several items from the proposed budget, including cost of living raises for employees, the council approved a budget that increased those tax rates 5.8 percent.

The proposed budget released Monday calls for raising the real estate tax rate from 73.2 cents per $100 of assessed value, to 78.5 cents. This 5.3-cent rate increase would add $53 to the tax bill of a Hagerstown homeowner with property assessed at $100,000. That homeowner's real estate tax bill would go from $732 this year to $785 next year.

The state assesses real estate.

The business equipment tax is based on the cost, minus depreciation, of items such as furniture, fixtures and computers. Manufacturing machinery and equipment and retail and manufactured inventories are exempt from that tax, city Finance Director Al Martin said.

The business equipment tax rate is now $1.83 per $100 of assessed value, and the proposal calls for it to go to about $1.96.

If the increase is approved, a business with equipment assessed at $10,000 would pay $13 more in business property taxes next year. That business owner's tax bill, which would be $183 this year, would be about $196 next year.

City policy is to keep the business tax rate 2.5 times the real estate property tax rate, which means the rates rise or fall together, Martin said.

Money collected from those taxes goes to the city general fund, which pays for city departments including police, fire, and public works.

The general fund is about $24 million this fiscal year, which ends June 30, and is projected to be $25.7 million next fiscal year.

This proposed $1.7 million increase in the general fund includes an almost $1.2 million increase in spending on city employees' wages and benefits, and a $514,000 increase in spending on vehicles and construction projects, such as street repaving, Zimmerman said.

Hiring two new firefighters would cost $91,184 next fiscal year and bring the total number of Fire Department employees to 62, Assistant City Finance Director Ray Foltz said.

The $1.7 million in new income needed to balance the proposed general fund budget would come from additional tax revenue, state and federal grants, and several new or increased fees.

Due to growth and the increased value of some properties, the city's general fund would receive an additional $523,000 next fiscal year if the tax rates are unchanged.

The proposed real estate and business equipment tax rate increases would bring in an additional $930,000 next fiscal year, Martin said.

A federal grant will pay for another property maintenance inspector.

State grants will pay for two positions in the police department, the juvenile diversion officer, and a clerk to assist the domestic violence coordinator.

Some of the proposed fee changes include increases to engineering and planning review fees for new construction, and a new $100 fee for use and occupancy permit inspections.

But the proposed tax increases will not solve the long-term financial problems facing the city, Zimmerman said.

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