$600M Tax Revenue Shortfall Possible, Tax Hike Criticized

ROCKVILLE, MD — Despite massive layoffs and business closures that could lead to a $600 million revenue shortfall, Montgomery County Executive Marc Elrich hasn't changed his proposed budget to deal with the coronavirus, according to officials.

During a virtual council session on Thursday, councilmembers criticized the Democrat for not amending his budget plans. His $5.9 billion budget, which includes a property tax increase, was sent to the county council on March 16.

Council Vice President Tom Hucker, who was first elected in November of 2014, said he can't recall another time the executive did not have a savings plan.

"We weren't wild about the budget that was sent over — being fair — and knowing that it was put together built on assumptions that are no longer the case," Hucker said. "I think that we largely agree on this. But having our staff work with the executive branch staff is one thing, asking the executive to work with us to find savings in this unprecedented time and to direct his staff to find savings and give them a target to find savings, I think is the right thing to ask for as well."

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Echoing Hucker's sentiments, Councilmember Hans Riemer said "it is very unusual that the county executive has not recommended an amendment to his budget proposal."

"I joined the county council in 2010 and it was in the midst of the free fall in the recession. The county executive at that time was sending periodic budget amendments as the revenue numbers kept deteriorating," Riemer said. "The relevance here is it's the responsibility of leadership, of the county executive, to sit the parties down and try to work out at least the first attempt at matching the expenses with the revenues."

"All we've gotten from this county executive so far is he's continuing to advocate for his property tax increase in the midst of this recession," he continued. "And he's leaving it to us, so far, to have to make the tough decisions. I don't think that's the way this is supposed to work."

Elrich's budget calls for a proposed property tax rate of $1.02 per $100 of assessed value — almost 5 cents more than the current tax rate. A large portion of that increase reportedly would go to the county's public school system.

Last month, eight of the nine councilmembers criticized his tax hike proposal, saying that residents and business owners wanted support — not additional financial burdens — from their government leaders during the coronavirus outbreak.

At the time, Hucker was the only councilmember who didn't publicly push back on Elrich's proposal. The Democrat said he wanted to take more time to read the FY 2021 operating budget recommendation before commenting on it, according to The Washington Post.

Elrich previously released a statement on the budget, saying that it was developed before COVID-19 became a pandemic.

"At the time that we were developing this budget," Elrich said, "COVID-19 was not on the horizon and now, during these unique and difficult times, we have to factor in its impact. I stand by the need for us to increase our investment in education, but I understand the unique situation that we are currently in."

A lot has changed since Elrich first sent the budget to councilmembers.

More than 2,200 people in Montgomery County have been infected by the novel coronavirus and more than 35,000 residents have filed for unemployment.

On Thursday, the county council reviewed Elrich's $5.9 billion budget for next year, as well as the updated revenue projections for FY20 and FY21.

The council and executive staff developed three scenarios to estimate the impact on the county's tax revenue due to the pandemic:

Estimated Reductions in Tax Revenue (millions)

None of these scenarios consider changes in expenditures or the potential for additional state or federal aid.

The first scenario is most unlikely, Craig Howard, the council's deputy director, said. The third scenario means Montgomery County could see a $600 million decline in tax revenue during fiscal years 2020 and 2021 because of the coronavirus crisis.

According to Howard, a number of factors will impact these projections, including: estimates for reductions in wage and salary income; reductions in capital gains income; reductions in property taxes due to appealed assessments and a decrease in new construction; and reductions in property sales.

What's still unknown (and not included in the estimates) are the following: the impact of CARES Act benefits on unemployed or furloughed workers; the recovery period when social distancing measures are lifting; future stock market corrections and fluctuations; and repositioning by businesses and industries after the health crisis.

The county council is scheduled to vote on the budget on May 21.

June 1 is the deadline to approve the county executive's operating budget.

SEE ALSO:

• Unemployment During Coronavirus: 61K Marylanders Filed Claims
• How To Help Montgomery County During Coronavirus Outbreak
• 'I'm Worried:' Business Owners Apply For Grants To Stay Afloat
• Coronavirus Relief Act Would Prohibit Rent Increases In MoCo