MoCo Council President Proposes Increasing Real Estate Buying Tax to Fund School Construction
Montgomery County Council President Nancy Floreen has introduced a bill to provide additional funding for both school construction and affordable housing. The bill would increase the rate of the recordation tax levied under state law and allocate the revenue received from the recordation tax.
The County recordation tax is a tax on all home purchases and mortgage refinances. Floreen’s bill, Bill 15-16, would increase the tax levied on real estate purchase to generate $155 million for capital projects, mostly for school capacity and building improvements, and $30 million for rent assistance for low-and-moderate income households. Currently, the typical recordation tax on a $500,000 home is $3,105 and under the new rate, it would go up to $3,780 on July 1.
Right now the Montgomery County budget only provides funding for 10- to 12-percent of the Board of Education request for school construction. This morning, with no other options put on the table, Floreen introduced the bill to provide funding for additional school construction and affordable housing.
Over six years, the plan would raise an additional $185 million and help achieve 70 percent of the Board of Education’s request for new funding.
“Is there another solution out there?” Council President Floreen asked at her weekly press briefing Monday morning. She emphasized the need for a dedicated stream of continuous funding for both issues and thought this proposal was “affordable and progressive.” Expressing regret for having to seek additional funding sources, she thought there was no way around it, ““Residents remain concerned about the property tax, and this can be delivered in a way that is meaningful and sustainable,” said Floreen.
The plan is not without its detractors. The Greater Capital Area Association of Realtors immediately sent out an urgent call for action among its membership instructing them to write to the Montgomery County Council to oppose raising recordation taxes. Their website argues that the plan puts a tax on the County’s “approximately 12,000 homebuyers each year to provide services for all of the County’s over 1,000,000 residents” and “threatens the county’s housing market.”
New school construction is often needed because younger families buy homes in older neighborhoods, and newly-constructed homes are sold to families. Both situations lead to school overcrowding.
Board of Education member Patricia O’Neill described Montgomery County as “truly the old woman in the shoe” due to the district’s overcrowding problems at this morning’s Board of Ed meeting. O’Neill asked the staff to keep Board members updated on this legislation so that the Board could take action to support its passage.
A Montgomery County Council hearing on Bill 15-16 is scheduled for May 10, 2016, at 1:30 pm.
Cynthia Cotte Griffiths is the editor of Rockville View.
Photo by Rockville View.