Taxation Without Recreation

Montgomery County designates a portion of real-property taxes, paid by Takoma Park and other county property owners, for recreation.

“This tax is levied to defray a portion of the costs of providing, maintaining, and managing recreation facilities and programs throughout the County, with the exception of Rockville, Gaithersburg, and Washington Grove, which have their own separate tax levies for this purpose.” (Montgomery County Tax FAQ)

Yet Montgomery County doesn’t operate rec facilities or programming in Takoma Park, and provides only a relatively small amount of funding for city operation of the New Hampshire Avenue recreation center, a county-owned facility. There is no Montgomery County tax-duplication rebate for recreation.

Taxation Without Recreation? Yes, but fortunately a simple change to county code would fix the operating imbalance, accompanied by county commitment to modernize or rebuild the NH Ave facility, given the amount Takoma Park has paid in rec tax over the years. And perhaps this change can serve as a template for more-comprehensive steps to address the broader tax-duplication challenge.

Read on for —

• The Gory Details
• County Tax Code
• What to Do, and
• A comparative look at the Gaithersburg Situation
• A Comprehensive Solution

The Gory Details

The Montgomery County Recreational Tax rate is $.018 per $100 taxable-assessed value for the 2011 levy year (July 1, 2011-June 30, 2012), as documented in a county real-property tax schedule document.

Rockville, Gaithersburg, and Washington Grove residents do not pay the county Rec Tax because their cities provide the rec services they receive, just as Takoma Park provides rec services for its residents (and non-city residents who attend county schools here in Takoma Park!).

The owner of a property with a taxable assessment of $500,000 will pay $90 in Montgomery County Rec Tax per year: Not a lot, but compute for the whole of Takoma Park. I estimate that Takoma Park property owners will have paid over $350,000 in Rec Tax to the county for the year ending June 30, 2012 — $351,704.38 is the exact estimate — given a whole-city, fiscal-year 2012 (FY12) taxable base of $1,953,913,245.

Yet the city received only $79,670 in county rec funding in FY12, to run the New Hampshire Avenue rec center, a facility owned by the Maryland-National Park and Planning Commission (M-NCPPC) and operated by the city on subcontract to the Montgomery County Recreation Department. This figure was reduced, unilaterally by the county, from $125,000 in FY10 and prior years.

Do note that the NH rec center facility is old and shows its age. Montgomery County will need to renovate or replace the facility in the not-too-distant future. I hope the county will live up to that responsibility. Takoma Park property owners have paid enough in Rec taxes and other taxes, over the years, to justify the expenditure!

Tax Code

How is all this set up? The Recreation District is established under Section 41-5 of the County Code, while the Recreation District special tax is established in Section 41-2.

Sec. 41-2. Applicability and intent of chapter.

Except as otherwise provided herein, the provisions of this chapter shall be applicable throughout the county and within the recreation district, it being the intent hereof that limited recreational services may be provided hereunder throughout the county, the cost thereof to be defrayed from county-wide revenues, and that more complete recreational services may be provided hereunder in the recreation district, the cost of the latter to be defrayed from special taxes levied in the district. The department of recreation shall perform its functions both county-wide and within the recreation district, within the limitations of the funds appropriated for each area. Ordinances, rules and regulations adopted by the council hereunder may apply throughout the county or be confined to the recreation district, as the council shall designate. (Mont. Co. Code 1965, § 2-78; 1968 L.M.C., ch. 5, § 3.)

Sec. 41-5. “Recreation district” established.

There is hereby established a special taxing area, to be known as the “recreation district,” the boundaries of which shall include all of the county with the exception only of that area now or hereafter included within the incorporated boundaries of the City of Rockville, the City of Gaithersburg and the Town of Washington Grove. (Mont. Co. Code 1965, § 2-77.)

What To Do

The simplest approach is to ask the county to exempt Takoma Park property owners from the Rec Tax on their Takoma Park properties, same as Rockville, Gaithersburg, and Washington Grove have exemptions. The county council would pass legislation to include the City of Takoma Park in code Section 41-5, and the county would commit to either renovating or replacing the New Hampshire Avenue recreation center, or funding the City of Takoma Park’s undertaking the work, in the county’s capital budget.

I endorse this approach over an increase in the Montgomery County tax-duplication rebate, paid annually to the City of Takoma Park. An exemption would follow the Rockville, Gaithersburg, and Washington Grove precedent. It would handily take care of the recreation piece of the tax-duplication puzzle and reduce Takoma Park property owners’ tax burden, providing net savings even were the city to raise taxes to cover the relatively small county payments lost. The city could even expand its own rec programming. Earlier this year, Recreation Department Director Greg Clark presented, to the city council, a list of new and expanded initiatives that he would like to undertake. As a council member, I would love to have the headroom, afforded by reduced county taxes, to raise revenue to support these programs.

Can we be confident this approach would work? I think so, based on —

The Gaithersburg Situation

I asked Gaithersburg Mayor Sidney Katz —

Do Gaithersburg residents pay higher fees than other county residents to use county rec facilities? Are there other repercussions or downside to Gaithersburg properties not being subject to the county Rec tax?

Here’s his October 21, 2011 reply (I’ve been researching this issue for a while) —

City residents do not pay additional fees to utilize County facilities, though it is likely they would when utilizing other municipal sites. Our residents do pay for a very strong program of City fields, classes, leagues, pools, etc., which we budget out of our general fund revenue. Other than the County’s specialized venues, such as golf courses and the larger indoor aquatic centers, which are fee-for-use in any event, we meet the great majority of our residents’ recreational needs with our own programs. Overall, we feel our recreational programs meet or exceed County offerings.

A Comprehensive Solution

The City of Takoma Park would like to find a comprehensive solution to the overall tax-duplication challenge, one that would be agreeable to Montgomery County. We’ve been working on it for years. Myself, I was on the city’s Tax and Services Duplication Issues (TASDI) committee in 2004-5, and have pursued the issue in various ways since. So have Mayor Bruce Williams, my city council colleagues, and City Manager Barb Matthews, who served on a county-municipality Municipal Revenue Sharing Task Force whose report is complete and pending release by County Executive Ike Leggett. The county council’s Government Operations and Fiscal Policy (GOFP or GO) committee has tentatively scheduled a July 16 briefing on the report. GO members include District 5’s Councilmember Valerie Ervin and at-large Councilmember Hans Riemer, both of whom represent Takoma Park. Nancy Navarro (District 4) chairs the committee.

A comprehensive solution may involve bringing county tax-duplication payments and rebates to higher, fairer levels, reflecting the actual cost to municipalities, such as Takoma Park, of providing services that the county does not deliver, despite taxing for them. It may extend payments and rebates to services and facilities paid for by other than property taxes. It may involve exemption from certain county taxes of property owners and residents in municipalities — the solution I’m suggesting for the county Rec Tax. Whatever approach we take, the need and the desire are clear, for an adequate and fair solution, and I hope that the county council and executive will agree.

As always, I would really value hearing your thoughts on city issues and approaches. Should Takoma Park seek exemption from the Montgomery County Recreational Tax? Please do get in touch, by e-mail to sethg@takomagov.org or by phone, 301-873-8225.