Forest Heights Town Council OKs tax hike

Amid trepidation from residents, the Forest Heights Town Council approved a measure May 19 that would increase the town's property tax rate to avoid a looming budget deficit.

The Town Council voted 5-2 in favor of passing a modest increase to its property tax rate to avoid a more than $55,000 deficit projected for fiscal 2011, which begins July 1.

During a work session meeting May 3, Mayor Andrea McCutcheon and Councilwoman Jacqueline Goodall (Ward 2) warned the council that if measures were not taken to close the projected budget gap, the town would have to start looking for ways to reduce spending, including not hiring additional police officers and delaying annual raises to town employees.

But residents blasted town officials at the May 19 meeting, arguing they failed to adequately explain how the tax hike would impact homeowners. Other residents demanded to know why, if the town was staring down a deficit, it was investing so much money in upgrades to the town's municipality building, including $200,000 for an eco-friendly green roof and renovations to the building's meeting room.

"A lot of people don't understand how they're going to be taxed," said town resident Earl Lomax. "People don't know they're going to be taxed."

The tax increase, which takes effect in November, will raise the property tax rate from 0.5300 percent to 0.5671 percent to help narrow the budget gap. The increase, which would cost homeowners approximately $14 more each year in property tax for a home valued at $150,000, is expected to bring in $70,000 of revenue for the town.

Miranda Shepard, the town's treasurer, explained that the rate increase does not mean all homeowners would pay more in taxes in fiscal 2011 compared with fiscal 2010. She said if a home's property value declines, so would the amount the resident pays in taxes.

The projected $55,000 deficit for fiscal 2011 stems from a decline in revenue from property tax this fiscal year. The economy fueled a projected decline in the value of residential property in the town by more than $10 million, from $158 million during fiscal 2010 to $148 million for fiscal 2011, according to the Maryland State Department of Assessments and Taxation.

The decline caused the town's property tax revenues to fall from $841,000 in fiscal 2010 to a projected $786,000 for fiscal 2011. The town's operating budget for fiscal 2010 is $1.1 million, with property tax revenue accounting for about 70 percent.

Still, residents questioned if mismanagement of funds, not the economy, was to blame for the deficit.

"You're saying all these things about a green roof, but our taxes are going up — it doesn't add up," said Larry McDougal, a 10-year resident. "If you're getting all these grants, why are taxes going up?"

McDougal said he already pays almost $4,000 annually. His property taxes have increased each of the 10 years he has owned his Forest Heights home, and his property value dropped from $225,000 to $169,000 over the last year.

Goodall said the grants and bonds the town received to pay for upgrades to the municipal building were specifically marked for those improvements, which property tax revenue will not pay for because the revenue is for operational costs.

She added that the town needed to cut energy costs to be more efficient.

"Forest Heights has operated as a village," she said. "We're [now] in the 21st century. We have things hitting us [financially]."