[UPDATE] On May 9, the council voted 7–4 to increase the recordation tax premium rate while leaving the base rate and school implement rate unchanged.
This past week, a second round of delays for school construction projects were considered by the Montgomery County Council due to lower revenue projections. Damascus High School, Magruder High School and Highland View Elementary School received the bad news in this round. Damascus High was delayed in 2020 and the other two projects were included in last year’s cuts which included 8 project delays.
The last few years have included many school construction project delays or even cancellations due to multiple pressures.
In light of these pending delays, Councilmembers Kristin Mink (D) and Will Jawando (D) introduced Council Bill 17-23, which would raise the progressive recordation tax (a fee you pay when you buy a house or refinance above the original cost of the house) and Councilmembers Kate Stewart (D), Sidney Katz (D) and Natali Fani-González (D) submitted an amendment to the bill with support from Council President Evan Glass (D). Montgomery County Council of PTAs (MCCPTA) supports these efforts. How did we get here and why should we pass a progressive recordation tax increase?
Tax Policy: Three years ago, representing the MCCPTA Capital Improvements Program (CIP) Committee, I was part of intense negotiations regarding the county’s Growth and Infrastructure Policy, which includes the Adequate Public Facility Ordinance. I was fortunate to have a group of dedicated parents with me who were willing to dig into the weeds of this complicated policy. We weighed in, concentrating on paying for the impact of new student seats generated from new development and turnover. After much deliberation, the Planning Department sent the County Council a plan that cut impact tax rates to encourage building in desired areas and suggested raising a progressive tax. Their reasoning was that turnover of single-family housing was the main driver of school overcrowding and a higher recordation tax would help to pay for those seats. The last County Council made some minor changes and passed all of the provisions, including the impact tax cut, but did not take up the recordation tax rate increase. This decision happened when the pandemic was heating up and before the housing boom. We would have avoided some school delays if we had been able to reap the benefits from the additional money that the increased recordation tax would have generated during the boom.
Reduced Bonding: The last County Council also reduced borrowing to pay for schools because they were concerned with how much money we were using to pay off debt, even though we had record low interest rates.
Inflation: A big factor causing multiple construction delays was the COVID-19 economy, which caused tremendous inflationary pressures on construction. For instance, the Woodward High School rebuild was estimated to cost $125 million to build in 2019, but now a scaled-down version is estimated at $196 million. The Northwood High School rebuild went from a projected $138 million to $203 million in this CIP.
Enrollment growth: The MCPS student body grew by almost 3,000 students this year — after a short term dip in enrollment during the pandemic — and this growth is expected to continue. We currently have 420 portable classrooms.
These four factors have left our school CIP in an untenable situation. Not only have school construction projects experienced years of delays, our large maintenance projects have also been cut. Even when advocacy for a school project is successful, money is often taken from the less visible maintenance project, which leads to worsening conditions in our schools like mold growth, plumbing issues and extremely hot or cold classrooms. The state did send record amounts of money to our construction budget through the Built to Learn Act, but inflation has blunted the effect of those dollars.
Last, if we are serious about equity in this county, we need to come up with funds to cover projects that are finally up for consideration in our less-resourced areas. For 10 years, we skewed funds to the Bethesda/Chevy Chase/Potomac areas, spending over twice as much there even though they had less growth than the neighboring Silver Spring district. We also borrowed more at that time to cover those projects. Now that there is a stronger equity policy in effect, we need to fund the CIP properly so that other county areas can benefit from significant investment as well. This tax increase won’t be the full solution to our CIP budget problems, but it is an important and necessary step in providing a healthy learning spaces for our children in Montgomery County.
Laura Stewart is chair of Capital Improvements Program Committee at the Montgomery County Council of Parent Teacher Associations and the 1st Vice President of the Montgomery County Women’s Democratic Club.
From Guest Commentary, Maryland Matters, April 22, 2023