Ocean City Today

State provides counties no guidance on tax differential

By Brian Gilliland | Feb 01, 2018

(Feb. 2, 2018) Though the state allows counties to charge municipalities different tax rates based on duplicated services, it takes no position on how those policies are implemented, leaving the parties to hash out the details.

Montgomery County, for example, offers each taxpayer a credit on his or her county property tax, which shows up on the annual bill. In Worcester County, County Attorney Maureen Howarth said the treasurer’s department would divide the county into “taxing areas” and each area would pay a different rate based upon the location.

For fiscal 2018, which began on July 1, 2017, the county constant yield rate is 82.2 cents per $100 of assessed value, which is the minimum tax rate the county could charge all of its residents to bring in the same amount of money it did the previous fiscal year.

If, however, certain taxpayers were charged less than others, a shortfall would be created, potentially resulting in tax hikes elsewhere in the county.

The annual tax rates are set during budget negotiations, which begin later this spring.

Locally, the issue may be forced, as Ocean City has filed suit in District Court to have a judge decide if the state code governing tax differentials is consistent with the state constitution.

The county was served with the suit on Jan. 29. A response has yet to be filed and no court date has been set. The county has 30 days to respond unless it files for an extension, which must then be approve by a judge.

Ocean City has been priming for this legal action for about a year, after at least a decade of back-and-forth with Worcester County officials on the issue.

Currently, the county collects all tax revenue, and pays back the municipalities in the form of grants each year on top of other reimbursements and ongoing programs. Ocean City receives the largest of these grants at about $2 million per year.

Resort officials have long felt they deserved more, based on services that the county provides but resort taxpayers don’t necessarily use. For example, both the city and county have public works departments, and hashing out what each provides can get complicated.

Two studies have been performed by consultants, one paid for by the city and one by the paid for by county, and the amounts reached were off by $10 million, depending on who funded the study.

The city’s suit alleges a section of state law which divides the counties into those that could provide municipalities with tax differentials and those that must provide differentials is unconstitutional.

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