CHESTERTOWN — For a few years, Chestertown Mayor David Foster has gone before the Kent County Commissioners asking the county for a tax differential for his residents.
A tax differential is a lower county property tax rate within the municipality, set up to compensate municipalities for services provided in lieu of similar county services.
Many counties in Maryland have established a tax set-off system, providing either a tax differential or tax rebate to the municipality.
Foster asked for this once again at the commissioner’s April 9, budget work session.
His position on the matter has not changed: Chestertown residents and businesses are overtaxed while non-town residents in the county are undertaxed.
Around the same time last year, Foster presented this issue alongside Council member Tom Herz. They had requested the commissioners to help them fund a study to determine if a tax differential was fair, and if so, how much compensation to each municipality?
The commissioners at that time could not fulfill the mayor’s request. They stated that with the 2020 Kirwan Blueprint education bill hanging over their heads, the mayor would have to find another way to fund his study.
Foster did just that and reported the results this month.
The study was done by Thomas Luke Spreen, Ph.D and Nicholas Finio, Ph.D, prepared by the National Center for Smart Growth Research and Education at the University of Maryland.
Their research took a month to complete, and Spreen and Finio, using data from Chestertown, Rock Hall and Galena used two approaches to determine their findings.
In the first method, they estimated the value of parallel public services (police, roads, parks) provided by Chestertown in fiscal year (FY) 2022 was approximately $913,000, equivalent to a $0.1544 reduction in the county tax rate per $100 of assessed value (AV) for properties within Chestertown. The second approach suggests that Chestertown provides parallel (duplicative) services (for police, roads, parks) valued at $617,900, which is equal to a $0.1045 per $100 of AV tax differential from the county tax rate.
Similar research concluded Rock Hall and Galena saved the county $51,310 and $900, respectively.
Although the methods yielded different results, Foster was satisfied with the conclusion.
He explained to the commissioners that Chestertown residents and businesses are paying 10-15% more in county taxes than they should — one of the researchers said that was a conservative estimate.
“Tax payers are taxed twice because of dual services,” Foster said.
He said he’s not seeking to create a rift between the town and the county.
He just wants what is equitable for his residents.
“We pay for the non-municipal areas. They don’t pay for the municipality. And not only are the people in the municipalities taxed for services they don’t receive, people in the non-municipal areas are getting more than they pay for,” Foster said.
People living in a municipality have lower income than those living in the non-municipal area, Foster added, citing data from the U.S. Bureau of Census that was verified from the Maryland Department of Planning.
“So in a sense it’s a reverse Robin Hood situation,” Foster noted, “where non-municipality residents are being subsidized by residents in municipalities.”
This creates a lack of trust, he pointed out.
And it’s not a new issue either.
He said the tax differential study started in 1986, when the state required eight counties to sit down with the municipalities and provide a mechanism to provide compensation when they provided their own services.
Foster said some counties were holdouts, but since 1986, 80% of the counties in the state have either provided a tax differential to the citizens of the town or a tax rebate to the municipality.
Kent County is not included in that group along with Wicomico and Somerset.
“For reasons we still do not understand, those counties on the Eastern Shore decided no we’re not going to do it. We’re too poor,” Foster said to the commissioners.
Two commissioners before their election said they would support a study, and the third commissioner had warned Foster that a study might show the opposite; that the town owes money to the county instead, Foster said.
Foster said he understands the pressing issues the commissioners brought up last year have not gone away.
He said ideally he’d like to see a 10-15% tax differential, but he said if the commissioners decide to reduce their taxes by just 5% that would make a significant difference.
Based on the study, Foster told the commissioners this is not, or never has been, just a Chestertown issue.
Foster said, “What I’m saying is I want you to do what’s best for Kent County. And I believe if you’re doing what’s best, you will look seriously at the study we have presented to you, and decide it’s better for trust, equity, economic development and the environment.”
Unlike last year, the commissioners did not respond to Foster.
The mayor later said he was discouraged by this reaction and also that at the meeting there were no public comments. He said each year the county has a responsibility to meet with the municipalities to discuss this important issue.
You can find the full study at https://townofchestertown.com on the home page.
Click on “Tax Differential Study,” and then “Kent County Tax Set Offs NCSG Report 3-22-24.as Kent County Tax Set Offs NCSG Report 3-22-24.”
The mayor encouraged the public to read it and contact him if there are any questions.
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