September  22,  2007

New version of tax benefit
measure ready for Council

County Councilman George Smiley pledged unequivocally to bring a proposed ordinance to significantly cut back the residential property tax exemption program for seniors and disabled persons to an up-or-down vote at Council's Oct. 9 session.

The measure will be the same as the one he withdrew from consideration on Sept. 11 except for two points. The limit on annual income for seniors, aged 65 or older, to qualify for the exemption will remain at $50,000, as provided by current law, and the limit for the disabled will be raised to $50,000 from the present $40,000.

Like the earlier measure, this one will reduce the exemption to tax on the first $32,000 of assessed property value, down from $50,000 at present; require four years residency in the state, although not necessarily in the county; and offer only a minimal benefit on properties assessed at more than $125,000.

If enacted, the ordinance will affect those who apply for an exemption for the tax year beginning July 1, 2008, and subsequent years. Those now receiving an exemption would continue to do so under provisions of the present law. If they move, however, the present exemption would not go with them. If they still qualify, they would receive a benefit in the new amount.

That would have the effect of 'grandfathering' any property owner who was eligible for an exemption as of last June 1 and either applied by then or takes advantage of a provision in the law to seek a pro-rated rebate on a quarterly basis during the present tax year. There is no late-filing clause in the proposed ordinance. Those who have become eligible since June 1 or who become eligible before the June 1, 2008, deadline would be governed by the new law.

Calculated on the present tax rate, the value of an exemption is now $280.70. It would drop to $179.65 if Smiley's ordinance is enacted.

The new proposal, like the withdrawn one, also provides for a proportionately much greater reduction in the sanitary sewer fee benefit. Instead of being billed a flat $39 a year, those meeting the same eligibility standards would pay half of what would be due if calculated by the regular formula or $50, whichever is more.

In conversation with Delaforum and other news media on Sept. 21, Smiley insisted that he has not made an effort to determine whether he has sufficient support to get the seven votes needed for the 13-member Council to enact the proposed ordinance. "Some are [probably] willing to make the decision; some will not. I can only speak for me," he said. "I hope Council members will take a very serious look at it."

Since distributing copies of the new proposal -- with a request that it be "kept in-house" -- on Sept. 17, he has received responses from two colleagues, he said. He characterized those responses as "positive," but did not give other details.

Councilman Penrose Hollins, Smiley said, asked to remain a cosponsor of the new measure. Smiley is cochair of Council's finance committee. William Tansey, the other committee cochair, has not publicly indicated his views on the measure.

Smiley said he withdrew the original ordinance after he and other Council members received an e.mail from the State Disabilities Council, an advisory panel for the Department of Health & Social Services, objecting to the disparity between the property-tax benefit offered to seniors and the one available to the disabled. It also requested that the eligibility income ceiling be set at 250% of the federal poverty level. That way it would raise automatically as the cost of living goes up.

Smiley said he did not accept the escalator clause because there would not be a corresponding one on the other side of the ledger to increase county revenue, but agreed to even the benefit. The disparity has existed since Council raised the income level for seniors four years ago but -- apparently inadvertently -- overlooked the one for the disabled.

In any event, Smiley said he wanted to provide additional time for his colleagues to consider the disabilities panel's views as well as views expressed by their constituents. He said he would not be swayed by the latter consideration. "I did not run [for office] the first time to get elected the second time," he said.

Smiley said he is not satisfied that the new ordinance "does all I'd like it to do," but added that he is "willing to take little steps to get the county to where it needs to be fiscally." He explained that he considers the alternatives to be "little steps [or] no steps at all."

The county finance department estimates that the new measure will net county government between $95,000 and $100,000 in property tax revenue and between $50,000 and $60,000 in additional sewer fee revenue in fiscal 2009, ratcheting up to between $285,000 and $300,000 and between $150,000 and $180,000, respectively, in fiscal 2011. Those estimates are down from between $175,000 and $200,000 in property tax revenue and between $195,000 and $225,000 in additional sewer revenue in fiscal 2009, ratcheting up to between $525,000 and $600,000 and between $195,000 and $225,000, respectively, in fiscal 2011.

Smiley said he did not approach the issue as a revenue enhancer but as a matter of equity. Someone age 25 with two children and a large mortgage could well be "at more of an economic disadvantage" than a retired senior with a comfortable pension, he explained. Neither has greater or less access to police protection, parks, libraries and other county services than the other.

A tax exemption requires that those paying the full rate subsidize those who receive the exemption, he said. Viewed in that light, the exemption is a government expenditure which Smiley said should be cut just as other county government spending is being cut.

Michael Strine, the county's chief financial officer, said the tax exemption program -- both in its present form and as Smiley is proposing -- is not unlike similar programs in many other jurisdictions. As long as the basis -- property assessment -- and the tax rate remain the same for every taxpayer, the county legislature has the right to determine who, if anyone, should receive a benefit and what that benefit should be, he maintained.

He also said that county officials are in continuing touch with members of the General Assembly seeking support for some form of assistance to cope with what the Coons administration has termed a structural problem in county finances. Also, Strine said, the final set of recommendations from the taskforce looking into future financing is nearly completed.

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