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The latest fun and games, courtesy of star-crossed excise tax

October 28, 2007|By TIM ROWLAND

When the history of the Washington County excise tax written, it's going to have to be a two-volume set.

Five years have come and gone, and there is still no clear vision for the tax on development that is intended to pay for the infrastructure needed to handle our up until recently rapid growth.

Part of the problem is the nature of the tax itself.

Basically, we are an anti-tax community, I feel pretty safe in saying that. So any new tax is circumspect. But without the excise tax, the money to build needed schools and such would still have to come from somewhere, which means that taxes on everyone - not just the newbies - would likely have to be raised.

The excise tax targets new homes and businesses, meaning, in effect, that if you move into the community and build a home, you are responsible for a greater tax burden because you are contributing to the need for additional schools and services.

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This is justified by the fact that long-time residents have already paid to build the existing schools. Fair enough. Except that if a couple with no kids moves here and builds, that couple is liable for the tax - but a couple with 10 kids can buy an existing house and be held blameless. Or an older couple that already lives here, but is looking to downsize, also gets hit if they choose to build a new home.

So whether you like the excise tax depends on your own individual situation. If you live here and don't plan on moving, you like it. If you're a developer, you hate it. If you rent, it's fine. If you are an empty nester building your dream home, it's patently unfair. If you're a real estate agent who sells both old and property homes - well, you may feel very strongly both ways.

Add to this the fact that our commissioners and state lawmakers have not been on the same page since Day 1. Lawmakers have properly, if grudgingly, given commissioners authority to enact the tax, but not without strings.

This is where the most recent festivities begin. When passing the newest version of the excise tax last winter, state lawmakers required that commissioners appoint a task force to study the tax and make permanent recommendations.

Meanwhile, commissioners, believing the rates might need to be adjusted and some existing loopholes closed, called for the tax to expire the following (next) summer, which, they believed, would force the lawmakers to pass a revised (probably higher) tax this coming winter, rather that sit by and do nothing, leaving the current rates in tact.

Are we having fun yet?

The commissioners dutifully appointed a task force to study the tax and, in a gamble that didn't exactly pay off, named a number of developers and builders (including Del. LeRoy Myers) to the panel.

Commissioners have been accused of packing the task force with developers, or basically selling out and putting the foxes in charge of the henhouse.

But this isn't entirely the case. At least some of the commissioners thought that once the developers saw the unvarnished numbers they would see the financial bind the county was in, and agree that there was no way around the steeper rates.

That would give the new and improved excise tax credibility. If the developers themselves saw the need, it would be hard for the state delegation to drag its feet.

Well, needless to say, the developers didn't see the need.

Just the opposite. Developers et. al. recommended a lowball, $2 a square foot for residential property, although they did advise closure of several problematic loopholes in the tax.

Joe Lane crunches the numbers on the opposing page, but for our purposes it's enough to know that $2 a foot is well short of what's on the books now. The county has drawn up a number of financial scenarios using per-foot tax variables juxtaposed against variable amounts of new growth. Under one of the plausible possibilities, the $2 baseline would cost the county more than $10 million, a loss in revenue the county believes it can't afford.

It figures that the housing slump arrived shortly after the county came to depend on a tax on growth - county passes a new tax on development and suddenly nobody is developing. It was like taxing unicorns after the Flood.

An expected $11 million in revenue last year turned into a paltry $4 million.

Now this.

Commissioners are not bound to accept the task force's recommendations, but if they ignore them they can expect grief from the delegation in the coming session, especially when one member of the committee is a sitting delegate.

Worse, if the county and the delegation get into yet another fight on the matter and the delegation passes nothing, the tax will expire altogether next summer - just in time for development to start to recover from the current slump.

Washington County, by some estimates, can "absorb" a few hundred new homes a year, because a certain number of students will leave the system, through graduation or moving away. After that, the need for additional school and service revenue becomes critical.

If development picks back up again, and by 2009 it probably will, it's important the county have a meaningful growth tax on the books. And at first blush, $2 a foot doesn't sound meaningful. If it's not, school construction could fall hopelessly behind, especially with the state cutting back on funding.

So once again, something that should have been settled years ago is back before the legislature next year. You may wish to avert your eyes.

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