The county executive recently proposed increasing the recordation tax by one dollar and devoting the entire increase to agricultural preservation programs. That will take that tax from $6 to $7 per $500 of consideration and is estimated to yield $6.8 million annually.
The press release notes that although the jump is large, Frederick County is still competitive with peer jurisdictions if you consider recordation and transfer taxes; Frederick County has no transfer tax. It goes on to note that the increase will be modest when applied to an average Frederick County house sale/mortgage, just $270 for a buyer and a seller.
But there is no way around it. This proposed increase is huge. An increase of that magnitude would never be proposed for the real property tax rate but apparently is acceptable because the recordation tax is one that most people pay very infrequently — only when a property sells or refinances.
But a very substantial amount of the recording tax revenue will come from the sale or refinancing of properties such as Frederick Towne Mall, Frederick Brick Works and properties along the East Street corridor in Frederick. A jump from $6 to $7 will be an extremely large hit and could hamper redevelopment and most certainly will make it more expensive. And that translates into less affordable housing.
The dedication of the entire increase to agricultural preservation programs that have just tangential value to properties in urban areas also seems perversely unfair. Dedicated funding for certain programs can sometimes make sense. For example, government will tax motor fuel and dedicate that revenue to transportation projects. They will tax hotel stays and dedicate that to tourism promotion. In those cases, there is a connection between where the money comes from and where it is spent. But I fail to see any connection between collecting revenue from urban property and then by law restricting a good portion of it to solely rural programs.
Agricultural land preservation is indeed a worthy cause. But so are the enhancement of older urban areas, the adaptive reuse of historic property and affordable housing. Let us not further one good at the expense of others.
If indeed there is an urgent need to increase agricultural preservation and other rural programs, then I suggest the County Council do it via a modest rise in the general tax rate and not a gigantic increase in the recordation tax. If the county is determined to increase the recordation tax and to dedicate all of that increase to certain programs, then fairness would dictate that what is derived from rural ZIP codes be devoted to agricultural programs and what is derived from urban ZIP codes be devoted to improved transit or any other use with a more direct connection to the urban property owners that paid.