St. Mary’s County sets 3% income‑tax rate, adopts 5% growth assumption and approves new impact‑fee calculation

LEXINGTON PARK, Md. — St. Mary’s County commissioners on Feb. 15 directed staff to use a 3.0% county income‑tax rate and a 5.0% growth assumption for FY2023 revenue estimates, and accepted staff’s recommendation to add a $4.3 million adjustment to the income‑tax base reflecting state‑local tax (SALT) effects.

Why it matters: the income‑tax assumptions underpin the county’s revenue estimates for the operating budget and determine how much funding is available for county services and compensation requests.

Finance staff reported that a final tax‑year‑2020 payment of $1,400,000 raised the county’s six‑year average growth measure to 4.74%. Staff presented four growth scenarios converted into fiscal‑year numbers and a table showing projected revenue at alternative tax rates (current rate: 3.10%, alternatives: 3.05% and 3.00%). Staff told the commission that every five‑hundredths of a percent (0.05%) change in the income‑tax rate reduces revenue by about $900,000–$1,000,000; a 10‑basis‑point move (0.10%) in the examples discussed equated to roughly $1.9 million in revenue.

The board also directed staff to add $4,300,000 to the income‑tax estimate to account for the county’s six‑year average reconciliation of collections versus budget (the SALT‑related estimate discussed in the meeting). Staff said that amount will be added to the $121,500,000 base used in the revenue forecast.

On impact fees, staff presented the fifth phased‑in year of the county’s impact‑fee calculation. The presentation showed per‑dwelling fee components (schools, roads, parks and recreation) and reductions for other revenue sources; the net balance per single‑family dwelling under the FY2023 calculation was reported as $2,175. Staff said they have a price from TischlerBice of about $95,000 to produce an excise‑tax (replacement) calculation and that commissioners should expect a contractor to complete the study if they approve the approach. Commissioners provided consensus to approve the presented impact‑fee calculation and to proceed with work on an excise tax to replace impact fees as required by state law once that step proceeds.

Staff said they will update the revenue tables with the board’s direction, incorporate property‑tax estimates from the constant‑yield letter received the previous day, and return with the combined revenue picture for the March work session.

Ending: With the income‑tax rate set at 3.0% and growth at 5.0% for planning purposes and the $4.3 million SALT adjustment added to the base, staff will produce updated revenue estimates for the commissioners at the March work session and continue the contract procurement for the excise‑tax/impact‑fee calculation.