The Washington County Board of Commissioners are scheduled to discuss at Tuesday’s meeting whether to reduce or suspend the county’s excise tax on new construction.
The excise tax was meant to control growth and raise revenues for public infrastructure improvements, but under current economic conditions it is not meeting either goal and ought to be suspended, former county commissioner Ron Bowers told the Board of County Commissioners last week.
Bowers told the commissioners that instead of controlling growth, the tax of $3 per square foot on residential and commercial development now “stymies growth” and is “not nearly as successful in it’s secondary goal of increasing revenues.”
The tax is $3 per square foot for new construction, however, a residential stimulus program is in place that exempts the first 3,000 square feet of a dwelling from the tax. That stimulus is due to expire on June 30, County Budget and Finance Director Debra Murray said.
The county’s 10-year capital improvement plan anticipates lowering the excise tax to $1 per square foot, Murray said.
Seventy percent of the excise tax is supposed to go to schools, 23 percent to roads, 5 percent to other projects and 2 percent to libraries, Murray said.
Housing starts have fallen sharply since the recession began and the tax resulted in revenues of $432,413 last year, Murray said.
The excise tax has put Washington County at a disadvantage to neighboring counties that do not have it, Bowers told the commissioners.
While Frederick County does not have an excise tax, it does have impact fees on new home construction for school and library construction, county spokeswoman Sarah Lankford Sprecher said in an e-mail. The impact fee is $15,185, according to the Frederick County website.
“The suspension of the excise tax would make projects feasible that are collecting dust,” Bowers said. The county could adjust the tax as construction activity goes up or down, he said.
“You could dial it up as activity increases and dial it back as activity slows,” Bowers said.
“Construction season begins in March,” Bowers said. “You can’t wait much longer or you lose the whole season.”
Bowers was told the board would have to schedule and hold a public hearing before the excise tax ordinance can be amended.