County reluctantly OKs revisions to excise tax

June 19, 2008|By BOB MAGINNIS

Watching the Washington County Commissioners discuss the latest revision of the county's excise tax was like watching five men try to capture a poisonous snake - they knew the job had to be done, but nobody wanted to get bitten.

In this case, getting "bitten" would mean being labeled as a public official who raises taxes - and as someone hostile to prospective new homeowners as well.

The latter is the argument that's been used for decades whenever county government has proposed a fee on new construction to pay for the services - schools and roads, for examples - that development requires.

The old chestnut was trotted out again Tuesday by Jeremy Holder, project manager for Westfields housing development on Sharpsburg Pike.

Holder said that a provision in the ordinance that provides for doubling the tax when a developer builds more than 25 units in a subdivision in one fiscal year.


Holder said that because of the down housing market, the commissioners could "rest assured" that the tax would be passed on to home buyers.

Question: If the market is down, isn't the developer less likely to build more homes?

If I were a developer, my real objection would be that the tax must be paid before a building permit is issued - long before there's any possibility of passing it along to the new home buyer.

Changing the excise tax is necessary because in fiscal 2007, collection were more than $11 million below estimates.

The housing slowdown is partly to blame, but also tabbed as culprits in the shortfall were the excise tax exemptions that went to "work force housing" and elderly housing.

The latter was a problem because it required someone to make sure that no one not classified as "elderly" moved into the property.

The Hagerstown Housing Authority might be able to keep track of such tenants, but would private developers? What incentives would they have to do so?

If Grandma's granddaughter falls out with her live-in boyfriend, who's going to tell Granny that she can't move her grandbabies into what was designated as senior-only housing?

No one, that's who, especially if Granny is paying her rent (or house payment) on time. The new ordinance spares the county government the need to take on such enforcement.

The history of the excise tax is interesting, as I found when I dug through The Herald-Mail archives on the subject.

In 2001, the county commissioners were seeking a 1 percent tax on real-estate transfers. The real-estate people said it made no sense to add an estimated $1,000 to closing costs at the same time that the state was trying to reduce them.

Enter Del. Christopher Shank, who looked at impact fees, then rejected them as too complicated in favor of an excise tax. Shank proposed a $1,500-per-home tax.

Given that there were 600 local housing starts per year, Shank said such a fee could yield $1 million a year.

Two years later, the commissioners accepted Shank's proposal to levy an excise tax before implementing a transfer tax.

Since then, the problem has been with the formula used. On Tuesday, the commissioners rejected the flat-fee approach in favor of a fee based on the project's square footage.

What citizens, including those employed in the building trades, need to realize is that unless such taxes are used, every taxpayer will pay a share of what new development costs. Those folks who tell you different are probably trying to shift their share to someone else.

In my Wednesday column, I noted that the cost of Hagerstown's take-home vehicles had gone from $58,348.63 in 2006 to $79,991.16 in 2007.

Karen Giffin, the city's Community Relations director, said that both figures include the cost of maintaining the vehicles during their regular daytime duties. I stand corrected.

Bob Maginnis is editorial page editor of The Herald-Mail.

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